Study Says New Insurance Regulations Benefit Individual Plans

Dec 5, 2012

A new report says people who buy individual health insurance are saving money because of new regulations under the Affordable Care Act.

The report comes from the non-profit Commonwealth Fund and says cost savings and rebates to individual plan customers totaled almost $1.5 billion last year.

The Affordable Care Act requires insurance companies to spend at least 80 percent of the premium dollars they collect paying for medical claims or quality improvement activities. If overhead and profit-taking cause them to fall short of that figure, they have to pay rebates to their customers.

Co-author of the report, Michael McCue, of Virginia Commonwealth University, says the law seems to be working as designed.

“It seems like most of the plans try to reduce down their administrative cost, as well as pay out more of their premium dollars in medical expenses to meet the MLR regulation of 80 percent," says McCue.

In the individual insurance market in Kansas, companies lowered their overhead by an average of $8 per member, and took $22 per member less in profit. In the individual, small group, and large group markets combined, insurance companies were able to reduce their overhead by more than $13 million dollars in Kansas alone.