medical loss ratio

Bob Semro's piece on how the Affordable Care Act is saving money for Americans  (Americans save $2.1 billion on insurance premiums, thanks to ACA) was posted as part of Viewpoints on the Kaiser Health News website.

For most Americans, when it comes to the Affordable Care Act, the proof is in the pudding: Will it make health care more affordable? Will it save me money?

Here's a number: $2.1 billion. That's the amount saved in 2012 by consumers because of two provisions of the ACA, according to the Department of Health and Human Services. That's money in the pocketbook for millions of Americans, and it supports the notion that insurance premiums can be better managed.

Consumers and businesses nationwide will receive an estimated $1.3 billion in rebates in August from health insurance companies that spent more on administration, overhead and profits than allowed under the Affordable Care Act, according to the Kaiser Family Foundation.

In Colorado, individuals and businesses will receive almost $26 million. Insurance companies will send rebates to 511,684 enrollees, for an average of $54.58 for each enrollee in the individual market, $82.62 in the small-group market and $47.84 in the large-group market.

Under the Affordable Care Act, the lion's share of each insurance premium dollar must be spent on health care.

That notion might seem obvious, but previously there was no national standard for what is termed the "medical loss ratio," or MLR. The ratio measures the split between health care spending and administrative and other costs. (Incidentally, MLR is an old insurance term that comes from the accounting departments, where spending on medical care was considered a loss deducted from income.)