Report: Health Reform Provision Is Lowering Premiums, Reducing Administrative Costs

An Affordable Care Act provision that requires insurers to spend 80 to 85 percent of premium dollars on health care coverage — the so-called medical loss ratio (MLR) — is leading some insurers to lower premiums, a new Government Accountability Office (GAO) report concludes. Insurers interviewed by GAO said “they are considering reducing premiums in 2012 partly in response to the PPACA MLR requirements” and state regulators reported that some companies “have not applied for premium increases and are making adjustments to lower premiums as a strategy to increase their MLRs.” Most of the insurers are also reducing brokers’ commissions in an effort to lower administrative spending and meet the MLR benchmarks. Companies that exceed the limits are required to rebate their beneficiaries.