$323M in MLR Rebates Expected in First Year

Cheryl Clark, February 17, 2012

[UPDATE: An earlier version of this story incorrectly reported the estimated amount of rebates expected to be paid to health plan enrollees. The correct amount is $323 million.]

In the latest in a string of announcements about ways the Affordable Care Act is improving patients' lives, federal health officials on Thursday said some health plan enrollees will soon start receiving rebates amounting to about $323 million for the first year.

As of 2011, the health reform law requires insurance companies in the individual and small group markets to spend at least 80% of their premium dollars collected on medical care and quality improvements. For companies in the large group market, the rate is 85%, Steven Larsen, Director of the Center for Consumer Information and Insurance Oversight for the Centers for Medicare & Medicaid Services said during a telephone news conference. 

The rule is commonly referred to as the medical loss ratio.

"Insurance companies not meeting the medical loss ratio standards will be required to provide rebates to their consumers," with the first round due to be paid by Aug. 1 this year, and each year thereafter.  "Enrollees or consumers who are owed a rebate will either see a reduction in their premiums, or will receive a rebate check, or if the enrollee paid by credit card, a lump sum reimbursement in the same amount will be made," he said.

Also, insurers will be providing consumers with information on how the companies spent their premium dollars, for example how much went to medical care versus "administrative expenses like marketing and advertising and underwriting, salaries and bonuses."

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