Health insurers in the US are likely to reduce
their premiums to conform to the new requirements of the medical
loss ratio (MLR) rules enacted as part of the Affordable Care Act,
according to a study.
The MLR rules, which became effective on 1
January 2011, aim to control private insurance costs for consumers
and government by requiring a minimum percentage of premium dollars
to be spent on medical care and health care quality improvement, as
opposed to administrative costs and corporate profits.
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Insurers must meet a minimum MLR of 80 percent
in the individual and small-group markets, and 85 percent in the
large group market, and issue rebates if they do not.
With MLR having come into effect, insurers
will either be motivated to reduce rates, expand medical coverage
to avoid rebates, or have to issue rebates, said the study.
Sara Collins, vice-president of The
Commonwealth Fund
States in the US may request a waiver from the
Department of Health and Human Services if they can show that
complying with the 80 percent MLR would force too many insurers to
exit the individual market, leaving members with fewer insurance
options.
Seven states have already been granted a
waiver, out of 17 that have applied, with allowable MLRs ranging
from 65 percent to 75 percent.
Commonwealth Fund vice president Sara Collins
said: “Cutting down on administrative and other non-medical costs
will lower premiums and help make health insurance more affordable
for all.”
Future impact
Looking ahead, the study said it is almost
certain that the MLR rule will produce different results in 2011
and future years, as insurers take steps to reduce their premiums
to conform to the new requirements.
This may include reducing administrative
costs, increasing spending related to improving quality of care, or
accepting lower profit margins.
The study from the Commonwealth Fund – a
US-headquartered private foundation aiming to promote a
high-performing healthcare system – said almost $1bn in rebates
would have been issued to about 5.3m people who receive coverage
through the individual market, or 53 percent of all those with
individual coverage nationwide, if the MLR rule had been in effect
a year earlier, in 2010.
