U.S. health insurers could end up paying about $1.1 billion in minimum medical loss ratio (MLR) rebates to 13 million plan members, according to officials at the U.S. Department of Health and Human Services.
HHS officials give the MLR rebate payment projections in a report on how the rebate program is going.
Provisions in the Patient Protection and Affordable Care Act of 2010 (PPACA) require carriers to spend at least 85% of large group revenue and 80% of individual and small group revenue on health care and quality improvement efforts or else pay rebates.
Carriers have used a process developed by state insurance regulators at the National Association of Insurance Commissioners (NAIC), Kansas City, Mo., and approved by HHS to compute and report on PPACA MLR rebate obligations.
HHS will soon be posting individual carriers’ MLR rebate data here, officials say.
Up till now, few individuals have heard much about the PPACA rebate provision.
Analysts at the Henry J. Kaiser Foundation Family Foundation, Menlo Park, Calif., said in November 2011 that only 38% of the participants in a Kaiser survey had heard of the PPACA minimum MLR requirement but that 60% said they liked the idea of requiring health insurers to meet minimum MLR requirements.
Now rebate checks and refunds may be going out to consumers as election season heats up.
Defenders of the MLR system say it can protect consumers against unreasonably high coverage prices.
Opponents say the new rules are cumbersome and expensive to administer, limit the ability of insurers to respond to changing conditions, and may encourage insurers to reduce payments to the same insurance brokers who are trying to help consumers navigate the health insurance market.
Analysts at the Commonwealth Fund, New York, had estimated, based on financial reports for 2010, that insurers might end up owing $2 billion in MLR rebates.
Kaiser analysts came closer to the mark. They estimated the payout might total about $1.3 billion.
HHS officials are expecting 11% of enrollees to get rebates in the large group market, 17% in the small group market, and 38% in the individual market.
The average payment per rebate could average $72 each for 5.3 million large-group enrollees; $96 each for 4.1 million individual and family coverage holders; and $97 each for 3.3 million small-group enrollee
Rebates in some states were much higher than others, HHS officials say.
In Vermont — a state in which the government is giving serious consideration to the idea of moving to a government-run, “single-payer” health insurance system — the average rebate will be $506 per enrollee.
In the individual and family market in Mississippi, the average rebate will be $651 per policyholder.
“Under the new health care law, rebates must be paid by Aug. 1 each year,” officials say.
An insurer can send a rebate check in the mail or put a lump-sum reimbursement in the credit-card or debit-card account used to pay the premium. An insurer also could reduce an enrollee’s future premiums.
An employer that sponsors a group plan and gets a rebate could forward the cash to employees or use the payment in a manner that benefits the employees, officials say.