Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Life Health > Health Insurance > Health Insurance

The Catch: Aetna and Rebates

Your article was successfully shared with the contacts you provided.

Executives from Aetna Inc. (NYSE:AET) talked a little more about the effects of the new minimum medical loss ratio (MLR) rebates than executives from other large health insurers have in recent days, but not much more.

Aetna, Hartford, is reporting $511 million in net income for the latest quarter on $8.9 billion in revenue, compared with $586 million in net income on $8.4 billion in revenue for the first quarter of 2011.

The company ended the quarter providing or administering health coverage for about 18 million people, about as many people as it was covering a year earlier.

Commercial plan enrollment held steady at about 16 million.

The minimum MLR provisions of the Patient Protection and Affordable Care Act of 2010 (PPACA) now require health insurers to spend 85% of large commercial group revenue and 80% of individual and small commercial group revenue on health care and quality improvement efforts or else send customers rebates to make up for low MLRs.

Aetna’s commercial medical benefit ratio increased to 79.9% for the first quarter, from 77% a year earlier.

The company did not mention the PPACA minimum MLR rules in its first-quarter earnings releases.

One large competitor, WellPoint Inc., Indianapolis (NYSE:WLP), also ignored the topic in its earnings release, and company executives mentioned the topic only briefly during a conference call with analysts. Another competitor, UnitedHealth Group Inc., Minnetonka, Minn. (NYSE:UNH), said that it had recorded a $130 million due to adjustments in its rebate total but gave little information about the adjustments.

Aetna executives did discuss the MLR rebate topic during their conference call, but not in an especially clear way.

Joseph Zubretsky, the chief financial officer, said about the company’s statutory reports, approximately: “We followed the prescriptive form to the letter. It may or may not accurately reflect rebate amounts that ultimately will be paid, and I would caution you there are major definitional differences between that form and what will ultimately be used to calculate the rebate…. There is room for favorability in our financial results. We don’t disclose the amount, but since many of the pool operators are above the minimum, improved performance can fall to the bottom line this year, as well as last year.”

I think that means the GAAP rebate numbers could look better than the statutory numbers. 


Analysts at the Henry J. Kaiser Family Foundation, Menlo Park, Calif., estimates insurers will end up paying out about $1.3 billion in PPACA MLR rebates this year.

That would average out to about $4 per U.S. resident and about $9 per U.S. resident with commercial health coverage.

In the individual market, about 3.3 million people, or 31% of holders of individual coverage, could get a total of $426 million rebates, and their rebates could average $127 per recipient.

In the small group market, 4.9 million enrollees could split $377 million in rebates, with an average rebate of $76 per recipient.

In the large group market, 7.5 million enrollees could split $541 million in rebates, with an average rebate of $72 per recipient.

America’s Health Insurance Plans (AHIP), Washington, is rolling its eyes at MLR rebate projections.

“Given the inherently unpredictable nature of health care costs, it is not surprising that some health plans expect to pay rebates to consumers in certain markets,” AHIP says in a statement. “However, the coverage disruptions and other unintended consequences of imposing a new arbitrary federal cap on health plan administrative costs are likely to outweigh any benefit these rebates will provide to consumers.”


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.