The influence of the Patient Protection and Affordable Care Act on spending patterns is beginning to be felt by insurers, which could lead to changes in pricing in some area of the U.S.
Reducing the administrative costs that insurers were reporting was a key target of the reform act. It required insurers to focus on their medical loss ratio — insurers either had to spend at least 80 percent of premium revenue on patient care and quality improvement, or rebate the difference.
That got insurers' attention. The Robert Wood Johnson Foundation released a study that showed that, overall, insurers spent 92 percent on patient care — well above the 80 percent target.
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Additionally, every state in the union reported a MLR of 80 percent or above — and 10 states said patient care spending exceeded 100 percent, "meaning that insurers spent more on medical care, on average, than they brought in from premiums," RWJ said.
"This could signal upcoming increases in the average premium amount, as insurance companies adjust premiums or services to more closely hit the ACA-mandated 80 percent MLR threshold," the foundation concluded.
States with MLRs at or above 10 percent probably won't experience premium increases, the foundation said.
"The upward trend in medical loss ratios in the individual market shows the impact of the ACA coverage provisions," said Kathy Hempstead, who directs coverage issues at the Robert Wood Johnson Foundation. "This trend, as well as the geographical pattern, suggest how premiums may need to adjust as some of the federal stabilizers phase out over the next few years."
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Dan Cook
Dan Cook is a journalist and communications consultant based in Portland, OR. During his journalism career he has been a reporter and editor for a variety of media companies, including American Lawyer Media, BusinessWeek, Newhouse Newspapers, Knight-Ridder, Time Inc., and Reuters. He specializes in health care and insurance related coverage for BenefitsPRO.
