Health insurers did a better job of meeting the new federal minimum medical loss ratio (MLR) targets in 2012 than in 2011, and they will end up paying fewer rebates to a smaller number of people.
Officials at the Center for Consumer Information & Insurance Oversight (CCIIO), the arm of the U.S. Department of Health and Human Services (HHS) responsible for helping HHS implement many Patient Protection and Affordable Care Act (PPACA) provisions, have just come out with a report on 2012 MLR rebate obligations.
U.S. insurers are on track to pay a total of $504 million in rebates to 8.5 million enrollees, down from $1.1 billion to 13 million enrollees in 2011.
The average size of a rebate will fall to $59, from $85.
The rebate total fell the most in the large-group market — to $109 million, from $403 million.
The total fell to $192 million, from $399 million, in the individual market, and to $203 million, from $290 million in the small-group market.
The share of premium revenue going to what HHS classifies as administrative overhead costs fell to 9.1 percent in 2012, from 9.4 percent in 2011, officials said.
Insurers owe the rebate because PPACA drafters tried to reduce health insurer expenditures on administrative costs by requiring insurers to spend 85 percent of large-group revenue and 80 percent of individual and small-group revenue on health care or quality improvement efforts.
Companies that miss the minimum MLR targets must provide rebates or other compensation for the insureds.
HHS officials contend that the program helps health coverage buyers who do not get rebates by encouraging insurers to hold down the profit margins built into their premiums.