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Study: Consumers Saved $2.1B On Individual Coverage Under Health Law

By Julie Appleby

June 6th, 2013, 3:06 PM

People who bought their own health insurance last year saved $2.1 billion because of the federal health law, mainly because of a provision that limits how much of their premium can go to insurers’ administration and profits, says a report out today from the Kaiser Family Foundation. (KHN is an editorially independent program of the foundation.)

The researchers estimate that premiums for the 11 million Americans who buy their own insurance would have been $1.9 billion higher in 2012 without the law. Some consumers will also see rebates estimated at $241 million, which will be sent out later this year.  While not every consumer saw savings or a rebate, the researchers estimated that the savings averaged $204 per person.

The main reason for the savings was attributed to a provision requiring insurers to issue rebates to consumers if they fail to spend at least 80 percent of every premium dollar on medical care and quality.

“One may or may not support the law or this provision in particular, but it’s had the clear effect of keeping premiums down and lowering the amount of premium that goes to cost and profits,” said co-author Larry Levitt.

Others, however, questioned the findings.

Robert Laszewski, a former insurance industry executive who now provides consulting services to insurers, said slowed premium increases are more likely a consequence of a years-long trend of declining use of medical care related to the sputtering economy.

Another factor, he added, was that insurers sharply reduced commissions paid to agents and brokers as a way to hold down premium increases and meet the requirements of the law.

“This is Obamacare cheerleading because it doesn’t put the facts in context,” Laszewski said. “Industry profits are at historic highs, so these rebates have not had an effect on profitability. What they’ve done is cut agents and brokers.”

America’s Health Insurance Plans, the industry trade group, did not have an immediate comment on the report. But it has been critical of the provision requiring rebates in the past, saying it places “arbitrary caps” on what insurers can spend on services that could help patients and does nothing to affect the true factors behind rising health care spending.

8 Responses to “Study: Consumers Saved $2.1B On Individual Coverage Under Health Law”

  1. randy says:

    Rebates? Imagine that! Before Obamacare, when would corrupt private insurers share the wealth with the consumer? With the new reform law, I guess these greedy executives had less in bonus money to buy that extra home in the Caymans, huh? Obamacare made these corrupt shysters give back the money they’ve been gouging from their subscribers for decades. I guess that’s why Republicans want to repeal Obamacare, huh? It benefits the consumer way too much for the GOP!

  2. killroy71 says:

    And that $2 billion is what percentage of overall premium paid? 1-2% A drop in the bucket. A bandaid. This is no “mission accomplished” moment if what you really are after is AFFORDABLE CARE, like the law says.

    Read what the researchers wrote about their own study at the KFF site — it’s loaded with caveats about the limits of the study parameters.

    Try to keep some perspective, here, people. But I guess if the administration is feeling beseiged with scandals, they’ll grab straws.

  3. lauren says:

    Tea Party perspective?

  4. Grace51 says:

    They are not considering the tax implications either of indvidual purchasing outside their employer. This is not a fringe benefit. Curious to see that study.

  5. Albert says:

    Just a ray of sunshine before the coming tsunami. Health care reform, excuse me, health insurance reform will be painful for all….

  6. lauren says:

    No industry in America needs to be reformed more than the private health insurance industry. For decades, the private health insurance industry has been among the most corrupt industries in America. Had Willie Sutton known he could have become a health insurance executive, he would have never robbed banks.

  7. John Spek says:

    If anyone really undersood the MLR rule, a ploted over time, they would be horriffied

    “The main reason for the savings was attributed to a provision requiring insurers to issue rebates to consumers if they fail to spend at least 80 percent of every premium dollar on medical care and quality.”

    The first savings was in cutting what brokers were paid. Many felt that.

    Notice the recession has resulted in medical layoffs – as utilization is down due to a lack off money.

    The next phase is the rising billed cost for services, as services are billed using the higher hospital / clinical codes.
    This will be possible because practices have ben consumed to form ACO’s.
    This is well published even in the NYT and WP.

    As rates rise, they will be the tide that raises premiums.
    As premiums rise – the dollar amount contained in the 20% will also rise, so profit rises, and it’s done by law.

  8. Ted says:

    Interesting how Brokers and Agents are suffering and that is brought out by a former industry exec. In the age of esurance, internet, and digital purchasing the need for an agent is greatly reduced so there should be many of them out of work completely.