By Bob Semro
For most Americans, when it comes to the Affordable Care Act, the proof is in the pudding: Will it make health care more affordable? Will it save me money?
Here’s a number: $2.1 billion. That’s the amount saved in 2012 by consumers because of two provisions of the ACA, according to the Department of Health and Human Services. That’s money in the pocketbook for millions of Americans, and it supports the notion that insurance premiums can be better managed.
One provision is the review of insurance rates by states, and the other is medical loss ratio requirements for insurance companies. We’ve written about both of these, but a recent report by HHS totals savings for this year – $1 billion saved by rate review and $1.1 billion because of MLR requirements.
State-based reviews, mandated under the ACA, allow states to reject proposed premium increases if they are deemed unjustifiable. The states that were the more rigorous in challenging rate increases, resulting in the biggest savings for consumers, were Washington, New York and California.
In Colorado, 45 individual and small-group insurance companies submitted rate filings for review with the Division of Insurance, according to the Kaiser Family Foundation. Nine filings had their proposed increases lowered, rejected or withdrawn. The average rate increase requested was 7.1 percent. The resulting average rate increase was 5 percent.
Medical loss ratio requirements say that insurance companies have to devote at least 80 percent of premium dollars to medical care. If companies exceed those limits, consumers receive rebates or premiums are reduced.
According to HHS, 13 million Americans received rebates totaling $1.1 billion. In Colorado, 208,197 residents received $27.5 million in rebates.
For more information:
Health and Human Services: 2012 Annual Rate Review Report: Rate Review Saves Estimated $1 Billion for Consumers
Kaiser Family Foundation report: Quantifying the Effects of Health Insurance Rate Review
Colorado Division of Regulatory Affairs-Division of Insurance
Bob Semro is a health care policy analyst with the Bell Policy Center, a non-partisan policy research center that advocates public policies that reflect progressive values.
Opinions communicated in Solutions represent the view of individual authors, and may not reflect the position of the University of Colorado Denver or the University of Colorado system.
Bob at the risk of singing a song you’ve heard many times there are a few things you’ve overlooked. In disclosure I am a licensed agent in Arizona and have been in the industry for 37 years. Generally across the full scope of underwriting and actuarial science insurance companies know exactly how much money is needed to fund risk. In returning money with the medical loss ratio although it is not called reserves that’s where it had to come from. Progressives like to tout how returning this money is so good for the consumer but I need to point out that removing the reserves from an insurance company means that they now can no longer use a pooling concept to spread risk across a large number of people. This is currently leading to smaller and smaller groups being held directly accountable for their full loss ratio. In truth no matter what business it is money in must exceed money out. In the insurance business pooling has been the only way to ameliorate out-of-control rate actions. Almost every aspect of PPACA has gone against any sensible interpretation of actuarial science. People like yourself are now espousing that advice given by people with no background provided by people willing to work for free is preferable to anything obtained from somebody who actually has knowledge in the subject. In addition there seems to be a prevailing attitude that insurance companies or anybody else should be able to pay your claims without collecting enough money to cover the cost. In addition the cost to administer these programs has been completely overlooked as to the amount that it really requires. In fact Obama care has saved consumers millions of dollars that they will now be giving back in dramatically huge rate actions. Those rate actions may not come from insurance companies they may now come to you in the form of tax increases necessary to fund a system that cannot be funded with the current format. Thank you for your time and interest.