Health Insurance and You!

With the Supreme Court’s recent deliberations on the constitutionality of 2010’s health reform law, much attention has been given to the law’s individual health insurance mandate. But another important aspect of the law was its medical loss ratio (MLR) rule, which required health insurance companies to spent at least 80% of premium revenue on actual medical expenses, as opposed to profits or overhead costs. For companies working with larger employers, that percentage goes up to 85%.

Many insurers already met the MLR standard, but this was the first time it’s been legally required. If insurers end up with too much revenue at the end of the year, they can return the extra to consumers as rebates.

Now, the first cycle of those rebates has begun, and according to estimates from the Kaiser Family Foundation (KFF), they’ll make a lot of consumers happy. More than 3 million individual market policyholders – one in three of those who buy their own coverage, reports Julie Rovner of NPR – and thousands of employers will receive a total of $1.3 billion in rebates. That averages out to $127 per person, writes Ricardo Alonso-Zaldivar of the Associated Press. Some consumers have already started receiving their rebates, and all must be notified and paid by August 1 of this year.

By the numbers:

• Individual market consumers will receive about $426 million total, mostly in Texas, Oklahoma, South Carolina, and Arizona.
• Hawaii is the only state where no one will receive a rebate (Alex Wayne, Bloomberg).
• Texas consumers and businesses will receive the most in rebates of any state, totaling about $186 million (Susannah Jacob, Texas Tribune).
• Florida comes in second, with about $148.5 million in rebates (John Dorschner, Miami Herald). Other state-specific totals come in at $14.6 for Connecticut residents and businesses (Arielle Levin Becker, Connecticut Mirror) and $30 million for Georgians (Andy Miller, Georgia Health News).
• According to a separate analysis by Goldman Sachs, UnitedHealth will pay about $307 million, Blue Cross Blue Shield Plans will pay about $250 million, Aetna will pay about $177 million, WellPoint will pay about $94 million, and Coventry will pay about $50 million.

Supporters of the health overhaul see the rebates as a sign that the law is cutting health costs and returning surplus profits to consumers, as it was intended to do. According to the KFF analysts, the MLR rule – in combination with federal review of premium increases over 10% – also discourages excessively high premiums in the first place, since insurers don’t want to be criticized when they issue rebates or lower their proposed rate increases.

But skeptics of the law say that for many people, $127 won’t cover even one month’s premiums. They add that other parts of health reform, such as benefit requirements and restrictions, will end up increasing premiums and other costs for consumers.

Readers, did you receive a rebate? Were you surprised to get it? Were you surprised by the amount?

For more information, see:

• Kaiser Family Foundation, 4/26/2012: Insurer Rebates under the Medical Loss Ratio: 2012 Estimates