Congresswoman Jackson Lee Says New Study Concludes A Key Provision in Affordable Care Act Saved Consumers $2.1 Billion in 2012

Today, Rep. Jackson Lee announced that a new study from the nonpartisan Kaiser Family Foundation concludes that the Affordable Care Act’s Medical Loss Ratio provision saved consumers in the individual insurance market an estimated $2.1 billion in 2012, the bulk of it in lower premium costs.

“This new study concludes that, because of the so-called “80/20” rule in the Affordable Care Act, consumers in the individual market have saved $2.1 billion in 2012 alone -- $1.9 billion in lower premiums and $241 million in rebates insurers estimate they will pay to consumers in the individual market in August based on their performance in 2012,” Rep. Jackson Lee said.

The Medical Loss Ratio provision (or “80/20” rule) in the Affordable Care Act, implemented in 2011, limits insurers’ administrative costs and profits by requiring them to issue consumer rebates if they fail to spend at least 80 percent of premiums on health care and quality improvement.

The Kaiser Family Foundation study concludes that the impact of the “80/20” rule has been particularly dramatic in the individual health insurance market. In 2010, fewer than half of the plans in the individual market were in compliance with the provision. The study found that the average percentage of premiums going for health care claims has been steadily increasing since the requirement went into effect in 2011. This means that individual market insurers are devoting a greater portion of premium dollars to health care claims and less to administrative costs and profits compared to before the provision went into effect. There have been numerous reports that insurers in the individual market, in order to avoid paying rebates, have worked to reduce their commissions and other administrative expenses to become more efficient.

Based on its analysis of the data, the study found that premiums in the individual market were $1.9 billion lower in 2012 than they would have been without this provision in the ACA. In addition, individual market insurers are expecting to issue $241 million in rebates to consumers in the individual market in 2013 – bringing the total savings to consumers in the individual market to $2.1 billion.

Due to the “80/20” rule, in August 2012, nearly 13 million Americans, in the individual, small group and large group markets, benefited from a total of $1.1 billion in rebates – based on insurers’ performance in 2011.

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