Insurer rebates under ACA loss-ratio rule fall in 2013

A federal rule requiring health insurers to spend a minimum percentage of premium dollars on medical care led to more than $332 million in consumer rebates last year, HHS reported last week. The figure is much lower than in the previous two years, which the Obama administration said reflects that insurers charged lower rates so they would clear the threshold.

Rebates issued under the medicalloss-ratio provision of the Affordable Care Act totaled $504 million in 2012 and $1.1 billion in 2011. But HHS said the rule saved individual consumers and employers a total of $4.1 billion in 2013 through lower premiums.

Intended to curb excessive administrative costs and profits, the medicalloss ratio requires health plans in individual and small-group markets to spend at least 80% of premium dollars on healthcare and efforts that improve care quality. That figure rises to 85% for insurers in the large-group market. Companies that don’t meet the standard must refund the difference to their customers.

More than 6.8 million Americans benefited from a rebate in 2013. The average medical-loss-ratio refund per family was $80. Insurers can rebate the money through a check in the mail, a reimbursement into a consumer’s insurance account, a reduction in next year’s premium or a lowered benefit cost for employer-sponsored plans.

Nearly 100 insurance companies refunded at least $1 million. Blue Cross and Blue Shield of Florida refunded the most, giving back more than $10.1 million to its members. Neighborhood Health Plan, run by Boston-based Partners HealthCare, issued more than $6 million in rebates. Several subsidiary plans within UnitedHealth Group, Aetna, Humana and Cigna Corp. were also among the big rebaters.

States that reported the highest medical-loss-ratio refunds in 2013 were Florida, Maryland, Massachusetts and Missouri, according to the HHS report. Florida alone accounted for 12.5% of all rebates in 2013.

America’s Health Insurance Plans has argued that the medical-loss-ratio rule excludes legitimate administrative costs such as fraud detection and does nothing to address medical cost growth that drives premium increases. Groups representing insurance agents and brokers are lobbying to exclude their fees from the calculation of administrative costs.