A new analysis finds American consumers saved billions in 2011 and 2012 thanks to a key provision of the Affordable Care Act.

The report from The Commonwealth Fund released Tuesday finds the medical loss ratio provision, which caps profits for health insurance companies, benefited consumers by about $3 billion over the past two years through a combination of rebates from insurance companies and reduced overhead spending.

The law’s provision limits insurance companies to spending a minimum of 80-85% of premiums specifically on treatment and medical costs, rather than overhead and profits.



The rebate receipts sent to consumers hit $1 billion in 2011 and about $500 million in 2012, an indication that insurance providers successfully shifted business models to fit the new spending requirements. In addition to the rebates provided to consumers, insurers reduced profits and spending on general overhead by about $1.4 billion, the report finds.

“The medical loss ratio requirement of the Affordable Care Act creates a higher-value insurance product for consumers,” said The Commonwealth Fund President David Blumenthal said in the report. “It ensures that a substantial portion of their premium dollar pays for medical care, as opposed to administrative costs and profits. It also encourages insurers to improve the care their customers receive, by investing in initiatives that will help achieve better outcomes for patients.”

Critics of the provision have argued it would force smaller insurance companies out of the market, but the report concludes so far that “hasn’t substantially reduced competition in health insurance markets or consumers’ choice of insurance plans.”

The report finds rebates dropped most in the large-group market, where they fell 71% from 2011 to 2012. For those in the individual market rebates decreased by roughly 50% and in the small-group market they dropped by 30% over the same time period.

The report also found total profits in the insurance industry decreased by about $300 million in 2012, with group insurance still bringing in 2.5-3% profit.