Nearly 78 million Americans saved $3.4 billion on their collective health insurance premiums in 2012, thanks to an Affordable Care Act provision that penalizes insurers for wasteful spending, the Obama administration announced Thursday.
The ACA’s “80/20 rule,” which took effect in 2011, requires insurers to spend at least 80 percent of premium payments on medical care or quality improvements and no more than 20 percent on administrative costs and overhead. Companies that violate the rule must pay rebates to their customers.
In 2012, nearly 12.8 million customers split $1.1 billion in rebates based on their 2011 premiums. But as more companies complied with the rule, total rebates fell to $500 million in 2012 and will be split later this summer among 8.5 million customers.
"Which means that consumers are saving up front instead of having to wait for a rebate. This is good news for everyone," said Teresa Miller, director of oversight for the Center for Consumer Information and Insurance Oversight at the U.S. Department of Health and Human Services.
The $3.4 billion in savings on 2012 premium costs reflects lower rates as more companies met the 80/20 rule. The 80/20 rule and other ACA provisions have saved consumers $5 billion on their premiums since 2011, HHS reports.
Insurance companies that didn’t meet the 80/20 guidelines will mail their customers a letter this summer explaining how they violated the rule and how much money they should expect in a rebate.
- TONY PUGH