Health insurers continued to narrow the gap between how much the drafters of the Patient Protection and Affordable Care Act (PPACA) wanted them to spend on health care and quality improvement and how much they do spend.
U.S. insurers are gearing up to pay $332 million in PPACA medical loss ratio (MLR) program rebates to 6.8 million people for 2013, for an average of $49 in rebate money per recipient.
That’s down from paying $504 million to 8.5 million recipients, for an average of $59 per recipient, for 2012.
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 the PPACA provisions that affect the commercial health insurance market, have published those figures in a report on its estimates of carriers’ 2013 MLR rebate obligations.
CCIIO also published its list of carriers that, according to its calculations, owe rebates.
Managers of each type of plan did a better job of meeting MLR targets. The rebate total fell to $128 million, from $192 million, in the individual market; to $122 million, from $203 million, in the small-group market; and to $82 million, from $109 million, in the large-group market.
The PPACA MLR provision requires 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 say the system helps health coverage buyers who do not get rebates, by encouraging insurers to hold down the profit margins built into their premiums.
Agents and brokers say the MLR system encourages insurers to cut producer compensation. Officials at the U.S. Government Accountability Office recently reported that one of eight insurers they surveyed said it had cut producer comp because of the MLR system. Three others said they had cut producer comp because of an industry trend toward paying a flat fee per application received.