America has spent more than $8,200 per person on health care annually, more than twice as much as other developed nations and an amount approaching 18 percent of gross domestic product. At least 7 percent of our health spending has gone toward administrative costs and other overhead, including what critics call egregious profit-taking by insurance companies.
The Affordable Care Act fights administrative profit-taking in two ways: It makes insurers submit any proposed rate increases of 10 percent or more for federal review, and when insurers spend less than 80 percent of individual plan premiums (85 percent for group plans) on actual health care, the law requires them to refund the difference to policyholders. In 2012, the first year of the "medical loss ratio" rebates, insurers returned nearly $1.1 billion to 13 million policyholders.
"Ultimately, either your insurer is going to lower your premium, or you're going to keep getting this end-of-year 'bonus,'" Kominski says. "Either way, we're better off."
Chollet adds: "Insurers have an extra incentive to keep premiums low."