Under the Affordable Care Act insurance companies must provide their customers with a rebate if their health insurance claim payments and quality improvement initiatives do not equal at least 80 to 85% of premiums (depending on the size of the group).
According to HHS, insurers have provided enrollees with rebates this year that totaled approximately $1.1billion. Rebates may be provided as a reduction in premiums or reimbursed directly to enrollees.
But what effect will all this have on the premiums people pay? Here is an assessment by the Congressional Budget Office (CBO).
Beyond 2012, in CBO’s judgment, the MLR policy under current law will continue to have the effect of reducing premiums relative to those in the absence of that policy. Over time, however, CBO expects that the reduction in premiums will be attenuated. Starting in 2014, a three-year moving average, rather than annual data, will be used to calculate the MLR, making the MLR targets easier to achieve.
In addition, CBO expects that there is an increasing probability that insurers will make changes – such as increasing spending on medical benefits or quality improvement activities – that will push premiums upward.
Overall, CBO estimates that the MLR requirements under current law will reduce premiums by about one-half of a percent, on average, over the next few years, declining to approximately one-tenth of a percent by the end of the 10-year projection period.
One tenth of one percent, does it all seem worth the effort? The fact is that claims are claims, costs are costs and attempts to manipulate the payment system, in this case insurance, will have limited and short lived results. The system will adjust. Even non insured government programs like Medicare where total administrative costs are not reflected in premiums because they are spread among various agencies must deal with escalating claims as the primary cost driver.
The quest for affordable health care (however that is defined) simply cannot be realized without changing the amount of health care we receive, how and where we receive it.
QUINNSCOMMENTARY 
Of course, the insurance companies are not potted plants. When they could guage whether or not they would have to pay a MLR based on 2011 experience, probably by the end of the third quarter 2011, nothing stopped them from adding a margin, a layer in the renewals on those policies that were not projected to pay a MLR rebate. Net impact on insurance companies – probably an increase in profits, new impact on insured participants and their employers, probably slightly higher prices in 2012. Relatively easy to add the margin in “trend”….
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