Health Insurer Rebates to Top $1 Billion
Experts are gathering more evidence that health insurer rebates this year will top $1 billion. Consumers and businesses can expect to receive notices of their rebates by August.
Rebates are required by new rules governing the medical loss ratio (MLR) for health insurers. Under this health reform policy, health insurers offering coverage to individuals and small businesses must spend at least 80 percent of their premium income on claims and quality improvement activities, and 20 percent or less must be reserved for administrative expenses. The MLR threshold is higher for large group plans, which have to spend at least 85 percent of premium income on claims and quality improvement.
Insurers that don’t meet these standards are required to issue rebates to their customers.
According to a new report from The Kaiser Family Foundation, preliminary estimates project that insurers will have to return $1.3 billion to customers this year, including $426 million in the individual market, $377 million in the small group market, and $541 million in the large group market.
Earlier this month, The Commonwealth Fund released its own estimates of rebates based on 2010 marketplace data. If the medical loss ratio rules were enacted then, insurers would have to give back roughly $2 billion to customers, with Texas issuing the highest amount at $255 million in rebates.
Kaiser’s analysis does not include the state of California, where many plans are regulated by the state Department of Managed Health Care and the data is not yet available. The figures, however, almost parallel estimates from the Department of Health and Human Services, which predicts that up to 9 million Americans could be eligible for rebates worth up to $1.4 billion.
Average rebates per person could total $164 in the individual market, according to HHS. That’s slightly higher than the average $127 Kaiser is predicting.
Kaiser also says the average rebates for individual purchasers range from just a few dollars in some states to as much as an average of $305 in Alaska, $294 in Maryland, $243 in Pennsylvania, $241 in Idaho, and $236 in Mississippi.
Rebates are expected to go to almost one-third (31 percent) of consumers in the individual market, Kaiser reports. Among employers, about one-quarter (28 percent) of the small group market and 19 percent of the large group market is projected to receive rebates. The share of consumers in the individual insurance market expected to receive rebates ranges from near zero in several states to as high as 86 percent in Oklahoma and 92 percent in Texas.
The Obama administration has allowed special consideration for particular market situations. In the individual market, Health and Human Services Secretary Kathleen Sebelius can adjust the MLR standard for a state if it’s determined that meeting that standard may destabilize the state’s individual insurance market.