The Obama administration scored some big points this week as millions of employers and health plan enrollees/voters divvied up an estimated $1.1 billion in rebates from health insurers. While it seems health insurers could have used the rebates to promote the fact they are putting money back into the pockets of their customers, most of them have done little more than quietly stuff the checks in envelopes and mail them off along with an HHS-mandated explanation of the rebate.
The rebates were triggered by the medical loss ratio (MLR) provision of the reform law, which requires insurers to spend no more than 20% of each premium dollar on administrative costs for individual and small-group plans, and no more than 15% for large-group plans. The average rebate per family is expected to be $152 in the individual market, $174 in the small-group market and $135 in the large-group market, according to HHS. But carriers contacted by AIS say the average check size is smaller than HHS estimates.
The industry seems to view the MLR rule as being overreaching, and promoting the rebates could be seen as evidence that consumers were overcharged. Moreover, health plans complain that the rule does little to control rising medical costs and could hamstring their efforts to improve consumer engagement or thwart fraud and abuse because those costs are considered administrative.
In an Aug. 1 note to reporters, America’s Health Insurance Plans (AHIP) noted that coverage costs are a reflection of soaring medical costs and have little to do with administrative costs. The trade group points to federal government data indicating that 96% of the increase in premiums over the past five years was due to increased spending on health care services.
Do you think the MLR rule will push health insurers to improve the quality of medical coverage? Do you foresee unintended consequences?