Report: Consumers Saw Nearly $1.5 Billion Benefit From MLR
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New State-by-State Report: Consumers Saw Nearly
Consumers saw nearly
"The medical loss ratio requirements are intended to give insurers an incentive to be more efficient and use most of their premium dollars for patient care," said
The new report, Insurers' Responses to Regulation of Medical Loss Ratios, by
However, the report finds that in small- and large-group markets, medical loss ratios were largely unchanged, and while spending on administrative costs dropped, profits increased. For example, in the small-group market, administrative costs were reduced by
The authors note that while insurers in the individual market have a less stringent medical loss ratio requirement--80 percent, as opposed to 85 percent in the large-group market--their traditionally higher overhead costs and lower medical loss ratios mean they have to work harder to reach the new standard. As a result, these insurers lowered both administrative costs and profit margins, therefore reducing growth in premiums.
Conversely, insurers in the small- and large-group markets generally already have medical loss ratios in the range of the required 85 percent, so while they reduced administrative costs, they had the option of turning those cost savings into profits instead of passing them along to consumers. In light of rising profits and falling administrative costs, the authors suggest it is possible insurers took profit increases in the small- and large-group markets to offset the reduced profits in the individual market. And because many insurers sell policies in all three markets, any reduction in administrative costs could have been spread across all of a given insurer's lines of business.
The Affordable Care Act aims to expand health insurance coverage to almost all Americans while improving health care quality and reducing costs. According to the new
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