The Medical Loss Ratio (MLR) regulations which is part of the affordable care act, states that insurer must spend 80 to 85 percent of premium on medical claims and quality improvement initiatives, and that if they spend less the money should be returned to premium holders as rebate. What I find interesting about this is the quality improvement piece as I did not know this what part of the law. Though insurers are not required to report the type of quality measures taken, they must report the amount of money spent on the following initiatives: reducing re-admission, reducing medical errors, patient safety improvement, increase wellness and promotions.
The Common Wealth fund, has published a report that looks at the median amount insurers spent on quality improvement initiative and MLR, they found that insurers spent less than one percent of premium on MLR or quality improvement activities.The study found that the amount spent on quality initiatives and paid out as rebate depends on corporate structure. They found that provider-sponsored insurers spent more on quality improvement measures and paid out less rebate on average than non-provider-sponsored insurer, non-profit provider spent more on quality initiatives and paid out less rebate than for profit and publicly traded company also spent more on quality initiatives and paid out less rebate than non-publicly traded company
In 2011 according to the study, insurers spend 11 percent on Administrative cost, 3.9 percent on operating profits, 0.7 percent on quality improvement initiatives, 84 percent on medical expenses and 0.5 percent on rebate.
Please read the Study here: T
he Common Wealth Fund.