By Ferdous Al-Faruque - 07/24/14 12:06 AM EDT
Insurance companies returned about $9 billion from premiums since 2011 because of an ObamaCare provision to cap how much profit they can make, according to a new Department of Health and Human Services report released Thursday.
Under the Affordable Care Act, insurance companies are required to spend at least 80 percent to 85 percent of the premiums they collect on patient care or to make improvements to healthcare quality.
If companies fail to meet that threshold, also known as the Medical Loss Ratio (MLR), they are required to return the difference to their insurance holders either directly or by reducing future premiums. If the insurance was bought through an employer, the employer must either do the same or provide better benefits.
HHS Secretary Sylvia BurwellSylvia Mathews BurwellOvernight Healthcare: McConnell unveils new Zika package | Manchin defends daughter on EpiPens | Bill includes M for opioid crisis Insurance executives ask for changes to ObamaCare Obama meets with insurance CEOs on health law MORE touted the findings of the report and said provisions like the MLR “are providing Americans with immediate savings and helping to bring transparency and accountability to the insurance market over the long-term.”
According to the report, the average family will either get a direct refund or reduction in their premiums in the amount of $80 this year.
A previous report by The Commonwealth Fund found that insurers returned more than $1.5 billion in rebates to consumers between 2011 and 2012.
Critics of the provision say it is a price control mechanism that will push small and medium-sized insurance providers out of business.
They argue those companies won’t be able to handle administrative costs, and the law as a result will reduce competition in the insurance market.
However, The Commonwealth Fund says that hasn’t been the case, and any loss of smaller insurance providers is simply a reflection of existing trends, where smaller insurance companies have been bought up by larger ones.