The Department of Health and Human Services (HHS) today predicted that consumers will receive $330 million in health insurance premium refunds this year because insurers will exceed profits and administrative expenses allowed under the Affordable Care Act (ACA).
Created through the ACA, the 80/20 rule, also known as the Medical Loss Ratio (MLR) rule, requires insurers to spend at least 80 percent of premium dollars on patient care and quality improvement activities. If insurers spend an excessive amount on profits and red tape, they owe a refund back to consumers.
Today's HHS report claims that last year alone, consumers nationwide saved $3.8 billion up front on their premiums as insurance companies operated more efficiently. Additionally, it claimed that consumers nationwide this year will save $330 million in refunds, with 6.8 million consumers due to receive an average refund benefit of $80 per family.
If an insurer does not spend enough premium dollars on patient care and quality improvement, it must pay refunds to consumers in one of the following ways:
- a refund check in the mail;
- a lump-sum reimbursement to the same account that was used to pay the premium;
- a reduction in their future premiums; or
- if the consumer bought insurance through their employer, their employer must provide one of the above options, or apply the refund in another manner that benefits its employees, such as more generous benefits.
According to HHS: "The 80/20 rule, along with other standards such as the required review of proposed premium increases, is one of many reforms created under the health law helping to slow premium growth and moderate premium rates. Combined with the savings consumers are receiving from tax credits on the Marketplace and the new market reforms, including the prohibition of pre-existing condition exclusions and charging women more for insurance than men, the 80/20 rule helps ensure every American has access to quality, affordable health insurance."