An HHS report released today shows that last year alone, consumers nationwide saved $3.8 billion up front on their premiums as insurance companies operated more efficiently. Additionally, consumers nationwide will save $330 million in refunds, with 6.8 million consumers due to receive an average refund benefit of $80 per family. This standard and other Affordable Care Act standards contributed to consumers saving approximately $4.1 billion on premiums in 2013, for a total of $9 billion in savings since the MLR program’s inception.
These savings all come from the 80:20 medical loss ration that requires insurers to limit their overhead to 20% of premiums. The effect of this requirement has been premium reductions totaling $3.8 Billion in 2013 alone. And the insurers who did not reduce their premiums were required to issue refunds to their customers. In the first three years the refunds that have been or will be paid totaled $1.9 Billion.
Most significantly, in the individual insurance market the spending on overhead dropped from 15.3% in 2011 to 11.7% in 2013.
The report also charts how refunds are declining each year as insurers reduce their premiums, which is exactly how the law was intended to work. For instance, in the individual market refunds went from $399 Million in 2011 to $192 Million in 2012 and $128 Million in 2013. There were similar reductions in the small group and large group markets. And in the aggregate, for all markets, refunds went from $1.1 Billion in 2011 to $332 Million in 2013. But most significantly those refund reduction were a direct result of insurers reducing their premiums to the point that for 2013 the ACA caused premium reductions in all markets of $3.85 Billion
This is real progress.