Getting More Value for Your Premium Dollar

The Kaiser Family Foundation released estimates of insurer rebates under the Medical Loss Ratio provision of the new health care law, the Affordable Care Act.  The Medical Loss Ratio provision, also known as the 80/20 rule, requires insurers to spend at least 80% of your premium dollar on medical care and quality improvement, rather than on administrative costs.  If an insurer does not meet the 80/20 standard, it is required to issue rebates to its consumers starting this year.

The Kaiser Family Foundation estimates that rebates will total $1.3 billion in 2012.  Thanks to the health care law, consumers are receiving more value for their premium dollar because insurance companies can no longer spend a substantial portion of consumers’ premium dollars on administrative costs and profits, including executive salaries, overhead, and marketing. Some insurance companies are already adjusting to meet this standard by changing their prices to give consumers more value for each dollar they spend on premiums.

Consumers eligible for rebates should expect to see them in their mailboxes by August. Consumers who won’t see rebates can also still feel good knowing that your health plan spent 80% of your premium dollar on health care.

In addition to the 80/20 rule, the Affordable Care Act contains a number of provisions to protect consumers from insurance industry abuses, including reviews of any proposed premium hikes of 10% or more.  Later this year, consumers will begin receiving a four-page, easy-to-understand summary of what their insurance provides so they can compare their coverage options and better understand the value of the coverage they purchase.  And in 2014, insurance companies will be prohibited from charging people higher rates or denying them coverage altogether due to pre-existing conditions or because of their gender. Go to www.HealthCare.gov to learn more about these protections under the law.