Why Are Some Insurers Issuing Rebates?
It might seem like a nice surprise to get a check in the mail that you weren’t expecting. But if that check comes from a health insurer, you might want to think about whether it really is a good deal.
The Affordable Care Act requires individual and group health insurers to publicly report their medical loss ratio (MLR), the percentage of each premium dollar that is spent on health care services and quality improvements. Insurance companies are required to spend at least 80 percent to 85 percent of collected premiums on actual medical care for individual, small group, large group and student group customers.
Any insurer that fails to meet this threshold must issue rebates to customers. Which means they were taking too much of your premium dollar for things like administration, marketing and profits — in other words, activities other than medical care.
Insurers set premiums annually, based on the amount of claims they expect to pay in the year. At the end of the year, if the company fails to spend the necessary amount on health care services, the rebate requirement kicks in. This provision of the ACA helps ensure that premiums are spent primarily on medical care and guards against insurers spending too much on administrative costs or taking them as profits.
BCBSNC has spent more than was required on medical care since the MLR rule began in 2011 (and years before), ensuring that customers receive the most return on investment for their own health. We reported this week that the company spent $272 million more on health care services than was required in 2013.
Consumer experts say the MLR requirement helps health insurance customers get better value out of the plans they purchase.
“The medical loss ratio requirement of the Affordable Care Act creates a higher-value insurance product for consumers,” David Blumenthal, MD, president of the Commonwealth Fund, recently told industry publication Fierce Health Payer. “It also encourages insurers to improve the care their customers receive, by investing in initiatives that will help achieve better outcomes for patients.”