Congressman John Garamendi

Representing the 3rd District of California
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Former Insurance Commissioner Congressman Garamendi Announces Consumers Saved $3.9 Billion on Premiums in 2012 Due to the Affordable Care Act

June 20, 2013
Press Release

1,433,787 California Residents will Benefit from $65,659,905 in Rebates This Summer, Averaging $71 per Family

WASHINGTON, DC – Today, Congressman John Garamendi (D-Fairfield, CA), who served as California’s Insurance Commissioner for eight years and was a health care advisor for President Clinton, announced that a new report from the U.S. Department of Health and Human Services (HHS) concludes that provisions of the Affordable Care Act saved consumers $3.9 billion on premiums in 2012.
“Because of health care reform, American consumers saved nearly $4 billion on premiums last year primarily due to the so-called 80/20 rule,” said Congressman Garamendi. “Health insurers must spend 80 cents of every premium dollar on medical care – instead of padding their profits at the expense of cash strapped patients. For years, health insurance companies have jacked up premiums while delaying and denying coverage, but the Affordable Care Act provides powerful tools to hold them accountable. In addition to requiring justification for substantial rate hikes, insurers must now respect a Patient’s Bill of Rights.”
Garamendi continued, “This summer, 1,433,787 Californians will receive $65,659,905 in rebates from insurance companies, averaging $71 per family, thanks to health reform.”
Created through the Affordable Care Act, the “80/20” rule requires insurers to spend at least 80 cents of every premium dollar on patient care and quality improvement.  If they spend a higher amount on other expenses like profits and red tape, they owe rebates back to consumers.  As a result, the HHS report found that, compared to 2011, insurance companies devoted a greater portion of premium dollars to patient care and less to “administrative costs” – in order to comply with the law’s requirement.  In short, the data in the report show that the law has motivated many plans to lower prices or improve their coverage to meet the new standard.
Nationwide, 77.8 million consumers saved $3.4 billion up front on their premiums as insurance companies operated more efficiently.  Additionally, consumers nationwide will save $500 million in rebates, with 8.5 million enrollees due to benefit from an average rebate of around $100 per family this summer.
In addition to saving on premiums, American consumers have also saved on co-pays for a variety of preventative services and on prescription drugs. For example, since the Affordable Care Act’s enactment, more than six million seniors have saved over $700 each on their prescription drugs. Also, more than 32 million seniors have accessed a free preventative service under the law.