MLR Statute Credited with $3.4B Insurance Premium Cut
"They realized that the downturn in healthcare cost growth was not just a blip and they needed to align premiums more closely with those costs," Jost told HealthLeaders Media. The MLR provides "strong encouragement to take that step" by requiring rebates to be paid by insurers with for MLR excesses. Thus insurers have been paying more attention to administration components such as marketing costs and broker fees.
For 2012 the rebates were about 50% lower, $504 million, while the number of consumers in line to receive a rebate fell by 34% to 8.5 million.
Last year was the first time CMS identified a corresponding premium savings. Among the components of the $3.4 billion premium reduction, the large group market accounted for 43% or $1.5 billion, while the individual and small group markets each accounted for 28%, or $980 million and $970 million, respectively.
Jost notes that the large group market typically has a better understanding of costs and is "probably much more accurate in projecting premiums," which is reflected in its significant contribution to the premium reduction.
By contrast, the small group market is challenged in identifying risks, probably charges a risk premium, and is more likely to "overestimate costs, charge higher premiums, and then pay a rebate," says Jost.
- HCA to Acquire CareNow Urgent Care Centers
- BCBS Tries New Drug Contracting Model
- Dental Board Case Before SCOTUS Has Far-Reaching Implications
- Abington Health, Jefferson Health Plan '100% Equal' Merger
- Federal Appeals Court Mulls Observation Status
- How the Military's EHR Reboot Will Impact Interoperability
- The Case for Recycling Surgical Supplies
- 76% of Physicians Don't Like CMS Quality Reporting Programs
- Ballot Initiative Pits Providers Against Payers in SD
- How One Health System Saved $3.5M in Benefits Costs