PPACA: California MLR Rebates to Average $38.89

The average California MLR rebate may cover the cost of tolls for 7 car trips across the Golden Gate Bridge. (AP Photo/Eric Risberg) The average California MLR rebate may cover the cost of tolls for 7 car trips across the Golden Gate Bridge. (AP Photo/Eric Risberg)

The cash toll for a passenger automobile that crosses the Golden Gate Bridge is $6.

The average California resident who gets a health insurance premium rebate as a result of minimum medical loss ratio (MLR) provisions in the Patient Protection and Affordable Care Act of 2010 (PPACA) will get $38.89 each, or another to pay for 7 trips across the bridge.

The PPACA minimum MLR provisions require insurers to spend 85% of large group revenue and 80% of individual and small group revenue on health care and quality improvement efforts or else send customers rebates.

Officials at the California Department of Insurance say health insurers in their state will be paying a total of about $74 million rebates to 1.9 million California residents.

The deadline for sending out rebate payments is today.

California Insurance Commissioner Dave Jones put out a statement giving the rebate figures and expressing support for the MLR provisions.

"The Affordable Care Act requires that more of our health insurance premium dollars be spent providing health care, rather than on administrative costs and profits," Jones says in the statement.

Officials gave rebate totals for 6 large carriers that are regulated as insurance companies.

Anthem Blue Cross, a unit of WellPoint Inc., Indianapolis (NYSE:WLP), will be paying a total of $1.3 million and an average of just $3.16 to 407,429 enrollees.

Blue Shield of California, San Francisco, the large insurer with the highest rebate average, will be paying a total of about $11 million in rebates, with an average of $45.15 going to 239,595 enrollees.

America's Health Insurance Plans (AHIP), Washington, says in a response to today's MLR rebate deadline that the MLR rebate requirement will do little to control increases in health care costs. 

"The data are very clear that soaring medical costs – not health plans’ administrative costs – are driving health care cost growth," AHIP says. "According to federal government data, 96% of the increase in premiums over the past five years was due to increased spending on health care services. The MLR completely ignores the real driver of premium increases."

The MLR limit also can limit health insurer spending on activities such as rooting out fraud, setting up accountable care organizations, evaluating health care providers' credentials, providing patients with access to automated records systems, and paying health insurance agents and brokers to help customers, AHIP says.

"Penalizing health plans for investing in these types of initiatives is the wrong approach," AHIP says. "All participants in the health care system should be incentivized to continually innovate and develop new ways to improve care for patients and lower health care costs."

Despite the challenges created by the MLR, health plans will continue to lead the way on delivery system reform and quality improvement. Health plans are partnering with hospitals and doctors all across the country to change payment models to reward quality and better health outcomes, and they have pioneered innovative programs and services to coordinate care for patients with multiple chronic conditions, help patients manage chronic disease, and promote prevention and wellness. These initiatives have demonstrated results in better health outcomes, improved patient safety, fewer preventable hospital readmissions and lower healthcare costs. In fact, policymakers are now trying to get Medicare and Medicaid to adopt many of the programs that have proven to work in the private sector.

It is also important to keep in mind the overall impact of the health care reform law on the cost of health care coverage. Major provision of the reform law will cause premium increases that far exceed the value of prospective rebates, including:
- A new $100 billion premium tax;
- Age rating restrictions that will cause significant premium increases for younger individuals; and
- New benefit mandates that will force millions of consumers and employer to purchase coverage that is more comprehensive – and more expensive – than they have today.

The health care reform law expands coverage to millions of Americans, a goal health plans have long supported, but this goal can only be sustained if health care coverage is affordable. To create a sustainable health care system, there needs to be a much greater focus on the soaring cost of medical care and provisions in the health care reform law that will add to the cost of health care coverage.

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