The Health Care Law Is Saving Americans Money

By Kathleen Sebelius, Secretary of Health and Human Services
Posted September 11, 2012

The Affordable Care Act holds insurance companies accountable and puts more money back into the pockets of Americans across the country. According to a new report, consumers saved over $2 billion because of new rules that protect people from insurance industry abuses.

As a former Insurance Commissioner, I’m familiar with how alone consumers can feel when dealing with their insurance companies.   Under the health care law, insurers are finally being held accountable to their policyholders.  For the first time ever, new rate review rules in the health care law prevent insurance companies in all states from raising rates with no accountability or transparency.  Forty-five states and the District of Columbia have received $160 million in grants to increase their oversight of premium hikes. 

Some states, like Nevada, are using the funds to better educate consumers about the resources available to them.  Others – like Mississippi and South Dakota – have used the money to add new consumer protections.  In these states, officials can not only review rate hikes, but can also reject those hikes that are not justified. 

And more improvements in states around the country are on the way.

Last September, we also put in place new rules that ensure that every single rate increase of 10 percent or more is  reviewed on either the state or federal level.  For the first time, we have been able to guarantee Americans that no matter what state they live in, insurers will no longer be able to raise their rates by double digits without justification.

These rules make the insurance marketplace more transparent and more competitive. And today’s report shows that these rules are beginning to work.  Of the double digit rate hikes that have been reviewed, half of them have been reduced or withdrawn altogether.  That’s saved nearly 800,000 Americans an estimated $148 million.

When you look at all reductions to proposed rate hikes, including those below 10 percent, consumers have saved an estimated $1 billion.

And that only begins to capture the effect of the law’s new protections.  For example, these numbers don’t count the countless additional rate hikes that insurance companies decided not to try, knowing they could no longer do so  without increased scrutiny.

These rules work hand in hand with other provisions of the law that save money for consumers. Thanks to the law’s 80/20 rule, 13 million Americans will benefit from an additional $1.1 billion in rebates.  That rule sets a maximum amount of Americans’ premiums insurers may spend on overhead like marketing and bonuses and requires them to pay their customers the difference if they exceed that limit. 

Added together, these reforms have saved consumers an estimated $2.1 billion in the last year.

What today’s report documents is a health insurance market that’s finally starting to work for consumers the way markets are supposed to.  Instead of being able to raise rates without any consequences, insurers are being forced to offer more competitive prices.  And consumers are getting more information to help them shop around for the best deal.

For today’s report, visit here.