What was the 80/20 Rule in the Affordable Care Act?

Has the 80/20 Rule delivered  value? What was it? It is a rule in the Affordable Care Act that holds healthcare payers  accountable to consumers and is supposed to ensure that families receive value for their premiums paid.

Due to healthcare reform, payer organizations now must disclose how much they spend on health care and how much they spend on administrative costs, such as salaries and marketing. If a payer spends less than 80% (85% in the large group market) of the premium on medical care and efforts to improve the quality of care, they must send a rebate check for the portion of premium that exceeded this limit to the consumer.

This rule is commonly known as the 80/20 rule or the Medical Loss Ratio (MLR) rule.  

Consumers are supposed to benefit from the 80/20 rule in two ways:

1)  Benefit upfront because payer organizations now keep premiums lower and operate more efficiently in order to meet the 80/20 rule.

2)If a Payer doesn’t meet the 80/20 rule, then the consumer benefits anf receives a rebate for the amount that exceeds this threshold.

According to CMS, in 2012, the 77.8 million consumers in the three markets covered by this 80/20 rule saved $3.4 billion on their premiums (I got a surprise check from my payer so I can vouch for this)  because of the 80/20 rule and other Affordable Care Act programs.

Payer organizations should have paid the rebates by August 1, 2013.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s