Insurers to rebate $1B to consumers under medical-loss ratio

Insurers are going to be rebating more than $1 billion to consumers as a result of the health reform law's medical-loss ratio (MLR) provision, which requires the companies to pay rebates if they don't spend 80 or 85 percent of their premiums on medical costs, according to two separate reports.

The Kaiser Family Foundation issued a report Thursday that found health insurers will be paying roughly $1.3 billion in rebates this year, reported Kaiser Health News.

Insurance companies will rebate $426 million to 31 percent of individual plan members, $377 million to 28 percent of small group plan members and $541 million to 19 percent of large group plan members, the National Journal reported.

The Kaiser study also found that rebates vary significantly across states. In Texas, for example, 92 percent of individual policyholders will get an average $172 rebate, while Hawaii will not receive a refund. Consumers in Alaska probably will see the largest refunds, which are expected to average $305.

Goldman Sachs reached a similar, although slightly lower, prediction. In a report published Wednesday, the bank said insurers will pay $1.2 billion in rebates, with Aetna, Coventry Health Care, UnitedHealth and WellPoint accounting for $600 million to $650 million of that total, Bloomberg reported.

America's Health Insurance Plans (AHIP) maintained its opposition to the rebates, saying the MLR rule has "unintended consequences," including insurers withdrawing from some markets, KHN noted. Robert Zirkelbach, AHIP's spokesperson, added that consumers aren't likely to see a notable reduction in premiums. "If the goal is to bring down the rising cost of healthcare, having this arbitrary cap on administrative costs isn't the way to it," he told Bloomberg.

But Timothy Jost, healthcare consumer advocate and professor at Washington and Lee University School of Law, said the MLR rule was never intended to result in large refunds. "The purpose isn't to generate rebates, but to force insurers to align their premiums more closely with their (medical) claims costs," Jost told KHN. "Each year, premium costs have gone up more than medical costs, so what the rule does is force insurers to be more efficient and, if they charge too much, to give some back."

To learn more:
- read the Kaiser Family Foundation report
- read the Kaiser Health News article
- check out the Bloomberg article
- see the National Journal article