Guaranteeing Value for Your Premium Dollars

When we pay for health insurance, we want to know that most of what we are paying for is for health care, not advertising, executive bonuses or overhead. It’s pretty simple: we want to get a good value for our premium dollars.

Thanks to a new rule (the “80/20 rule”) in the Affordable Care Act, you can be sure that insurance companies are spending generally at least 80 cents of every dollar you pay in premiums on your health care or activities that improve health care quality. If the insurance company fails to meet this standard, or the “medical loss ratio”, in any year, they have to pay you a rebate.

Insurance companies that didn’t meet the standard for coverage provided in 2011 are required to provide these rebates no later than August 1^st of this year, and to make sure you know what you are owed, insurance companies that owe rebates will also send a letter telling you how much you’ll receive. You can see what that letter will look like here.  According to early estimates from the Kaiser Family Foundation, insurance companies will provide 15.8 million Americans with $1.3 billion in rebates.

Today, we’re also finalizing a notice for insurance companies to send you if they meet or exceed the standard. If your insurance company is providing fair value for your premium dollars, you should know that too. You’ll be able to see your plan’s medical loss ratio on HealthCare.gov starting this summer. 

If you don’t get a rebate, that means your plan may have lowered prices or improved your coverage already.  For example, one insurer in West Virginia improved its medical loss ratio by lowering premiums by an average of $2,500 for 4,200 small businesses, cutting their premiums to give consumers welcome cost relief.  This is one of the ways the 80/20 rule is bringing value to consumers for their health care dollars.

Thanks to the Affordable Care Act rate review program, health insurers are also being held accountable for health insurance rate increases. Insurance companies are now required to disclose to their customers rate increases of 10 percent or more and to justify these increases – and HHS and the States have the authority to determine whether these increases are reasonable. For the first time, you can find all of this information about rate increases in your State in one location, at http://companyprofiles.HealthCare.gov/.

The 80/20 rule and the rate review program are two ways the Affordable Care Act is protecting you. You can find out more about how the Affordable Care Act increases transparency and protects consumers here: http://www.healthcare.gov/news/factsheets/2012/02/increasing-transparency02162012a.html.