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From Health Law Daily, September 13, 2013

$1.2 billion saved on health insurance premiums last year

By Kathryn S. Beard, JD

HHS released a new report showing that, due to the “rate review” provision of the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148), 6.8 million consumers saved an estimated $1.2 billion on health insurance premiums in 2012. The federal rate review rules under PPACA were implemented beginning September 1, 2011; the rules require insurance companies to submit for review and justify any proposed health insurance premium increase of 10 percent or more.

State rate review programs. PPACA provides states with Health Insurance Rate Review Grants to enhance state rate review programs. Forty-six states, the District of Columbia, and five territories have been awarded rate review grant funds. HHS’s review of the rate review program showed that in 2012, the rate review process saved consumers approximately $1.2 billion when compared to the increase amount initially requested by insurers. The average rate request increase dropped by 12 percent in the individual market and 19 percent in the small group market.

Medical Loss Ratio. The rate review initiative specifically works in conjunction with the Medical Loss Ratio (MLR) rule. The MLR rule requires insurance companies to spend at least 80 percent of premiums on health care or provide rebates to their customers. Thanks to the MLR rule, 77.8 million consumers saved an estimated $3.4 billion up front on their premiums last year. Insurance companies that did not meet the MLR requirements provided nearly 8.5 million Americans with $500 million in rebates. In American households that received the rebate, the average payment was $100.

Secretary’s response. “Thanks to the health care law, we are seeing that holding insurance companies accountable is leading to increased competition and saving billions of dollars for consumers across the country,” said Kathleen Sebelius, Secretary of HHS. “This type of competition and transparency will continue in the Health Insurance Marketplace, or Exchanges, where Americans will be able to shop for and compare plans side-by-side to find the one that fits their needs and budget.”

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