Insurers give $1.5B in rebates under O-Care

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Insurance companies returned over $1.5 billion in rebates to consumers between 2011 and 2012, according to a report issued on Tuesday.

The reason is an ObamaCare requirement meant to force companies to spend a higher proportion of premiums on medical costs or quality improvements.

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The new law states that 80-85 percent of premiums must be used by companies to pay for treatment and medical costs. Companies that fail to meet that ratio must pay rebates.

Critics of the provision, known as the medical loss ratio (MLR), have called it a price control mechanism that will push small and medium-sized insurance providers out of business.

They argue those companies won’t be able to handle administrative costs, and the law as a result will reduce competition in the insurance market.

The report from the Commonwealth Fund says that hasn’t been the case, and that any loss of smaller insurance providers was simply a continuation of existing trends.

The report also said consumer rebates fell from $1 billion in 2011 to $513 million in 2012, which indicates more insurers now are in compliance with the provision.

Consumer rebates fell most dramatically, 71 percent, for large insurers, from $388 million in 2011 to $111 million in 2012.

The rule also led insurance companies to reduce their own profit margins, spending on brokers fees, marketing and others administrative costs to the tune of $1.4 billion. These costs are overhead fees that insurance companies have typically pushed on to their customers.

“The Affordable Care Act has changed how health insurance is bought, sold, and managed and, on balance, those changes have produced substantial benefits for consumers without harming insurance markets,” said Michael McCue, the study’s lead author. “In its first two years, the MLR requirement contributed to a significant reduction in insurance administrative costs, a major source of health care cost growth in the United States.”