Consumers saw nearly $1.5 billion in insurer rebates andoverhead cost savings in 2011 due to health reform’s medical lossratio provision, according to a Commonwealth Fund study.

The MLR provision of the Patient Protection and Affordable CareAct requires that health insurers selling plans to individualconsumers spend at least 80 percent of the premiums they collect onmedical care. The report says that consumers with individualpolicies saw substantially reduced premiums when insurers reducedboth administrative costs and profits to meet the newstandards.

“The medical loss ratio requirements are intended to giveinsurers an incentive to be more efficient and use most of theirpremium dollars for patient care,” says Sara Collins, CommonwealthFund vice president for affordable health insurance. Collins saysthough that while the report is encouraging, it’s crucial to“monitor insurers’ responses to this regulation over time to ensurethat all purchasers and consumers benefit from the savings the lawis designed to encourage.”

Report authors say improvements in the individual insurancemarket were widespread: 39 states saw administrative costs drop, 37states saw medical loss ratios improve, and 34 states sawreductions in operating profits.

But the report found that in small- and large-group markets,medical loss ratios were largely unchanged, and while spending onadministrative costs dropped, profits increased. In the small-groupmarket, for instance, administrative costs were reduced by $190million, profits increased by $226 million, and the medical lossratio remained at 83 percent, unchanged from 2010.

The authors conclude that stronger measures—like rateregulation, tighter loss ratio rules, or enhanced competitivepressures—may be needed to ensure that these administrative costsare reduced in all markets and savings are passed along toconsumers.