This article was published in Scientific American’s former blog network and reflects the views of the author, not necessarily those of Scientific American
In an effort to rally support for healthcare reforms under the Affordable Care Act (ACA), President Barack Obama spoke today about how one requirement of his flagship law is already putting money back in Americans’ wallets. “It hasn’t been reported on a lot,” he said, “but that’s what happened.
Under a part of ACA already in effect, nicknamed the “80/20 rule” but officially called the Medical Loss Ratio, insurance companies are required to dedicate a significant chunk—at least 80 percent of premium dollars—to medical care and health care quality improvement instead of administrative costs or profit. If companies fall short of that figure the law requires them to provide a rebate to their customers.
Analysis from the Centers for Medicare and Medicaid Services highlighted by the President today found that 8.5 million Americans will receive rebates this summer as a result of the law, averaging close to $100 per family. The total rebates amount to $504 million. The ACA stipulates that large group plans must spend at least 85 percent of health care premiums on medical care and quality improvement while small group or individuals plans need to spend 80 percent of the premiums on those functions. Before the law there was no way for Americans to know if their monthly premium dollars were being spent on their actual health care.
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The rebates vary widely by state or U.S. territory. In Rhode Island, for example, rebates for an average family were $43, while in Massachusetts they tallied in at $457 and in Guam were $2,615. In 2012, 13 million refunds were distributed for 2011 and 8.5 million refunds for 2012 will go out to consumers this summer, Obama says. Even if individuals do not get rebates, he says, the ACA is still helping to reduce costs by charging less for care.
Another area of savings for consumers will come in October when the ACA’s online marketplaces to compare private health insurance plans launch, Obama says. A separate analysis released today by the Department of Health and Human Services indicates that preliminary prices for the monthly premiums offered to individuals under the new online marketplaces will be cheaper than expected. Data available for ten states and the District of Columbia suggest that the lowest cost plan in the individual market will be, on average, 18 percent lessexpensive than the HHS estimate of the premium conducted by the Congressional Budget Office in March 2012 . The preliminary rates may be lowered further before health plans are offered this fall.
The President’s speech comes amid myriad critiques from ACA detractors who seized upon the administration’s announcement this month that it plans to delay mandatory health coverage for workers at large companies. The employer mandate provision will now begin in 2015 instead of 2014, easing the burden on those employers. The delay, which means the employer mandate will go into effect after midterm elections, was framed by some as a triumph for businesses that had lobbied against the healthcare law. ACA defenders said that the delay would provide necessary time for employers to comply with the rules.
The individual mandate, a centerpiece of the law, still is set to go into effect in January.