Final MLR Report 07-22-2014

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<ul><li><p>8/12/2019 Final MLR Report 07-22-2014</p><p> 1/3</p><p>Page 1of 3</p><p>Consumers Benefitted From 80/20 Rule in 2013</p><p>The 80/20 Rule</p><p>The 80/20 rule of the Affordable Care Act offers important consumer protections to 78 million people</p><p>nationwide who have health insurance coverage through their employer (known as the group market)</p><p>or purchase their own health insurance in the individual market. The 80/20 rule, also known as theMedical Loss Ratio (MLR) rule, generally requires health insurance companies in the individual and small</p><p>group markets to spend at least 80 percent of premium dollars they collect on medical care or activities</p><p>to improve health care quality, and 85 percent in the large group market. Companies report their</p><p>premiums and spending by market (individual, small group, and large group markets) for each state in</p><p>which they operate. As shown in Figure 1, the percent of consumers insured by companies that met or</p><p>exceeded the MLR standard has risen each year since the 80/20 rule went into effect in 2011.</p><p>Refunds</p><p>If insurance companies do not meet or exceed the 80 or 85 percent MLR standard, they must pay</p><p>refunds to make up the difference. In the first three years of the MLR program, individual and employer</p><p>plan enrollees received or will receive over $1.9 billion in refunds. In this year alone, 6.8 million</p><p>consumers across all states and markets will receive over $330 million in refunds, with an averagerefund value of $80 per family. Health insurance companies are required to provide the 2013 refunds by</p><p>August 1, 2014 in one of the following ways: as a check in the mail; a reimbursement to the account that</p><p>was used to pay the premium; a direct reduction in their future premiums; or, if the consumer bought</p><p>insurance through their employer, the employer must provide the refund in one of these three ways or</p><p>apply the refund in a manner that benefits its employees.</p><p>Premium Savings</p><p>While refunds serve as a stopgap measure to ensure that consumers receive the required value for their</p><p>premium dollars, consumers are also saving money upfront because companies are charging lower</p><p>premiums and operating more efficiently than they would have in the absence of the 80/20 rule and</p><p>other health care reforms. If insurance companies had maintained their 2011 ratios of premiumsrelative to the cost of medical care, consumers would likely have paid an estimated $3.8 billion in</p><p>additional premiums in 2013. Figure 2shows the total savings by market, broken down into refund</p><p>savings and estimated upfront premium savings. Since 2011, consumers have saved an estimated $9</p><p>billion.</p><p>Administrative Expenses</p><p>Another way to measure the value for consumers is to look at how insurance companies are spending</p><p>money on expenses other than medical claims and quality improvement activities. A smaller portion of</p><p>premium dollars directed to administrative costs and profit indicates that consumers are receiving a</p><p>higher return on their premium dollars. Figure 3shows that the percent of premium dollars allocated to</p><p>administrative costs and profit dropped in all markets since the introduction of the 80/20 rule. The</p><p>largest decline is in the individual market, where profits and overhead spending as a percent of premiumdropped from 15.3 percent in 2011 to 11.7 percent in 2013. In the group markets, administrative</p><p>spending increased slightly from 2012 to 2013, but shows a net drop from 2011 to 2013.</p><p>For more information on 2013 MLRs and refunds by state and by market, visit</p><p>http://www.cms.gov/CCIIO/Resources/Data-Resources/mlr.html .</p>http://www.cms.gov/CCIIO/Resources/Data-Resources/mlr.htmlhttp://www.cms.gov/CCIIO/Resources/Data-Resources/mlr.htmlhttp://www.cms.gov/CCIIO/Resources/Data-Resources/mlr.html</li><li><p>8/12/2019 Final MLR Report 07-22-2014</p><p> 2/3</p><p>Page 2of 3</p><p>62.3%</p><p>73.7%</p><p>81.2%82.8% 83.1%</p><p>84.5%88.6%</p><p>94.2% 95.8%</p><p>60%</p><p>65%</p><p>70%</p><p>75%</p><p>80%</p><p>85%</p><p>90%</p><p>95%</p><p>100%</p><p>2011 2012 2013</p><p>%ofEnrollees*</p><p>Figure 1: More Enrollees Receive Required Upfront Value</p><p>Individual</p><p>Small Group</p><p>Large Group</p><p>*Enrollees covered by insurance companies that met or exceeded the MLR standard in the respective</p><p>state and market.</p><p>*Estimated premium savings are calculated relative to 2011, the first year of the 80/20 rule and data</p><p>collection.</p><p>Figure 2: Consumers Save$4.1 Billion in 2013</p><p>$4,500</p><p>$4,000 $332$504</p><p>)$3,500</p><p>sn$3,000illio</p><p>M$2,500in(sg</p><p>$2,000 $3,850$128 $3,440</p><p>vin$1,500 $109</p><p>Sa $82</p><p>$1,000 $192 $203 $122$1,690</p><p>$1,491</p><p>$500 $1,208$980 $970 $1,093$953$399 $290 $403</p><p>$02011 2012 2013 2011 2012 2013 2011 2012 2013 2011 2012 2013</p><p>Individual Small Group Large Group All Markets</p><p>Refunds Estimated Premium Savings*</p></li><li><p>8/12/2019 Final MLR Report 07-22-2014</p><p> 3/3</p><p>Page 3of 3</p><p>15.3%</p><p>17.4%</p><p>11.2%13.1%13.4%</p><p>16.1%</p><p>10.3%12.0%11.5%</p><p>16.4%</p><p>10.7%12.2%</p><p>0%</p><p>2%</p><p>4%</p><p>6%</p><p>8%</p><p>10%</p><p>12%</p><p>14%</p><p>16%</p><p>18%</p><p>20%</p><p>Individual Small Group Large Group All Markets</p><p>%ofPremium*</p><p>Figure 3: Overhead Spending Declines</p><p>2011 2012 2013</p><p>*Values reflect reported administrative costs and profits as a percent of premium.</p></li></ul>