Health Insurance Rebate ‘Check’s In The Mail’
By Dr. James Palermo // May 19, 2012
The Politics of Healthcare
(Video by KaiserHealthNews, July, 2011)
A rule created by the 2010 Patient Protection and Affordable Care Act (PPACA) and finalized last week is projected by the Kaiser Family Foundation to payout about $1.3 billion in insurance rebates to nearly 16 million Americans.
Medical Loss Ratio Mandate
The rule, known as the medical loss ratio (MLR) mandate, requires that insurers spend roughly 80 percent of all premiums paid by policyholders on healthcare services rather than on marketing, executive bonuses, other administrative costs, or profits. If spending on non-healthcare services exceeds 20% of premiums collected, insurers must return the excess as a rebate to their members.
The fact that the generally unpopular PPACA’s constitutionality will be determined by rule of the Supreme Court in June has no bearing on the rebates at this time. According to federal guidelines released May 11, the rebates, some of which have already been processed and distributed, must be processed no later than August 1st, and the health insurance companies must tell members who get a premium rebate this summer that the check is the direct result of the Obama administration’s health-care law.
The provision, which is known as the 80/20 rule, also requires insurers to formally notify policyholders whether or not they met or exceeded the MLR standard during a given year so that the consumer knows if their insurance company is providing fair value for premium dollars.
The Obama administration is trying to draw attention to the law’s benefits before the fall elections, and officials in the Obama campaign cite the rebate checks and the timing of the rule as a “just-in-time” boon in their strategy to counteract the PPACA’s relative unpopularity, and push public opinion back in the White House’s favor.
Largest Rebates In Texas and Florida
The Kaiser report includes state-by-state information on the total dollar amount of projected rebates, with the largest rebates overall estimated to go to consumers and businesses in Texas (total $186 million) and here in Florida ($149 million).
Health First Health Plan, the only healthcare insurance carrier headquartered in Brevard County and one of two provider-based health plans in the state, has historically been focused on controlling administrative costs. “Because of the structure of the Health First Health Plan as a provider-based entity without outside stockholder investment, we have traditionally been able to maintain our administrative costs plus profit well below the 20% threshold,” said Health First Health Plan president and CEO Margaret Haney.
She was happy to report that, “Administering and managing the health plan efficiently while always ensuring coverage of the highest quality care for our beneficiaries and fair compensation for our providers has positioned us well as it relates to the medical loss ratio provision in the PPACA. We met standard across the board and are not required to pay out any rebates to the 63,000 policyholders in the plan.”
Will 80/20 Rule Drive Down Premiums?
The Kaiser analysis also stated that, in some cases, premiums have decreased as a result of the 80/20 rule. “This study shows that asking insurance companies to put more of their premium dollar towards patient care rather than administration and profits is not only popular but also effective,” said Kaiser President and CEO Drew Altman. “There are tangible benefits for consumers and employers.”
However, there is a poignant counterpoint to Altman’s assessment of the Kaiser study, and one which has been emphatically asserted as a probable consequence of the 80/20 rule by its detractors.
With insurers mandated to pay for administrative expenses, overhead, marketing, and profits out of a capped 20% of premiums, ultimately if insurers want to increase their profits, they will have to increase the premiums they charge rather than restrain their growth.
The PPACA is truly a “political football,” and, although it appears that the Obama campaign may have completed a 3rd and long pass for a first down with the “check’s-in-the-mail” 80/20 rule, they still have a very long way to go before they get to the “red zone” (or perhaps that’s the “blue zone”) with Obamacare.