MLR Statute Credited with $3.4B Insurance Premium Cut
Both CMS and AHIP make good points, says Timothy Jost, a professor at Washington and Lee University School of Law who has studied the MLR process. "I think CMS is correct in its analysis that the main effect of the MLR has been to drive down premiums. Insurers respond that the main driver of healthcare premiums is increasing healthcare costs, and that's obviously true."
But while healthcare costs continue to increase, they are doing so at a much slower pace. A just released report from PricewaterhouseCoopers Health Research Institute's notes that for the fourth consecutive year, the pace of medical cost increases will slow. In 2014, healthcare costs are projected to increase by 6.5%, a full percentage point lower than the 2013 projected rate.
Jost, who is also a consumer representative on the National Association of Insurance Commissioners, says that despite the slowdown in healthcare costs and a corresponding drop in healthcare utilization, insurers did not respond by cutting premiums, and as a result there were often high profits for insurers on the for-profit side and large reserves for the not-for-profit insurers.
He notes that when the MLR was first implemented in 2011, insurers who didn't meet the MLR requirements found themselves owing 12.8 million members more than $1 billion in rebates.
That was something of a wake-up call for the health insurance industry.
- CMS Sets 2014 Pay Rates for Hospital Outpatient and Physician Services
- FDA hopes hospitals will switch to newly regulated pharmacies
- The 5 Biggest Healthcare Finance Trouble Spots
- Not-for-Profit Hospitals Find Opportunity Amid Uncertainty
- Nonprofit Hospital Outlook 'Negative' in 2014
- The Most Polarizing Topics in Healthcare IT
- How CPOE Will Make Healthcare Smarter
- Why You Should Involve Patients in Nursing Handoffs
- Are ACOs Really Different from HMOs?
- Rise of the Chief Strategy Officer