Americans may soon be getting checks in the mail, and they will have the federal healthcare reform law to thank.

 

One key, but little known provision of the Affordable Care Act, has to do with the medical loss ratio (MLR) and insurance companies.

 

The MLR involves the percentage of premiums that insurers actually pay out in medical claims — in other words, how much of the money they collect that goes to covering people’s healthcare.

 

If the MLR is higher, say 90%, that means 90 cents of every dollar insurers rake in goes to paying for medical services. In the early 1990s, the MLR for many insurance companies was 95%. But as insurers switched from nonprofit to for-profit status, the MLR began to drop because a lower MLR meant more of the premium dollars were going toward profits.

 

The new law says insurers can’t have an MLR below 80%. If it drops below this threshold, the company must send rebate checks to policyholders.

 

“That reckoning came last week for insurance companies that violated the law in 2011,” writes Wendell Potter, a former CIGNA executive who now writes for iWatch News.

 

“Checks from insurance companies to individuals are now pouring into mailboxes all across the country, and if the one received by a friend in Tennessee is an indication, most Americans are wondering what the heck is going on. Nobody, certainly not the local media, had clued them in on the fact that they might actually be able to put a few bucks in their pockets because of ObamaCare,” Potter added.

-Noel Brinkerhoff

A Nice Little Gift from ObamaCare Directly to You (by Wendell Potter, iWatch News)

What Is A Medical Loss Ratio? The Check Will Be In The Mail (by Carolyn McClanahan, Forbes)

Insurer Rebates under the Medical Loss Ratio: 2012 Estimates (by Cynthia Cox, Larry Levitt, and Gary Claxton, Kaiser Family Foundation)