Most insurers have already met health reform’s medical loss ratio standards, GAO says

The early results are in and, as of last year, most insurers have already met the new medical loss ratio (MLR) standards imposed by the 2010 health reform law, the Patient Protection and Affordable Care Act (PPACA), according to newly-released figures from the Government Accountability Office (GAO).

Under the PPACA, beginning in 2011, insurers are required to spend most of their customers' premium payments on medical care rather than on administrative costs or profit. In the large group market, insurers have to spend at least 85 percent of the premium payments on medical care and, in the small group market, they need to spend 80 percent on medical care. If they fail to meet these MLR rules, health reform legislation requires insurers to pay rebates to their enrollees.

These early GAO results are truly preliminary as 2011 numbers don’t have to be submitted to the Department of Health and Human Services (HHS) until June of 2012. However, these numbers are interesting as early indicators of compliance. Based on the early numbers, the GAO says, nearly two-thirds (64 percent) of all credible insurers would have met or exceeded the 2011 MLR standards. According to the GAO, a “higher percentage of insurers in the large and small group markets met or exceeded the standards compared to those in the individual market. Insurers in the individual market averaged higher nonclaims expenses, including expenses for brokers' commissions and fees, than those in other markets.” Seventy-seven percent of large group market insurers and 70 percent of small group market insurers would’ve met or exceeded the MLR standards, the GAO reports, while only 43 percent of insurers in the individual market would’ve met the standards.

In addition, the health reform law requires insurers to report MLRs by state. The GAO reports that, based on the early numbers, it found a “wide range” of reported MLRs for multistate insurers.

Overall, the GAO finds, 85 percent of insured Americans are covered in the large or small group markets. Only 15 percent of insureds are covered in the individual market.