Insurers for more than 600,000 Floridians will have to rebate some of the premium from last year because they didn’t comply with the spending rules in the Affordable Care Act, according to federal health officials.
The amount that must be refunded in this state by Aug. 1 tops $54 million, according to the Center for Consumer Information & Insurance Oversight. That’s only half of what insurers had to pay in rebates to Floridians last year.
While everyone likes to get a rebate, it’s actually good news that the amount owed to consumers has dropped, said Leah Barber-Heinz of the consumer group Florida CHAIN.
“It means that the Affordable Care Act is working and health care consumers are getting more value for their hard-earned dollars,” she said.
Nationally the story was the same: The rebates for 2012 totaled $504 million, down from $1.1 billion from the year before.
Individuals in FL to Get $40 Million
The Affordable Care Act requires that a certain percentage of the premium dollar be spent on medical care, rather than administrative costs and profits. This percentage is called the “Medical Loss Ratio,” or MLR. For large group plans, it’s 85 percent. For individual policies and small group plans, which have higher enrollment costs per policy, it’s 80 percent.
Of the $54 million in Florida rebates now being sent out, nearly $40 million of it is going to people who bought their own policies, as individuals or families. More than 300,000 people can expect to see these rebate checks, with an average of $164, according to the federal data.
About $13 million in checks will be going to employers who bought coverage for 255,000 workers in the small-group market. And about $1.5 million in rebates will go to large employers.
The logic behind the MLR limits is that they provide a moderating influence on prices, since there’s no point in a company jacking up premiums if it can’t keep the extra profits.
The rebate program is modeled on a Minnesota law passed 20 years ago. That state’s Democratic Sen. Al Franken, who pushed for the MLR rule over the protest of insurers, told the Minneapolis Star-Tribune that the drop in rebate amounts shows that the program is working as intended.
He said, “People are saving the money up front … and companies are using the 80 or 85 percent of premiums on actual health care. Which is the point.”
Golden Rule Owes the Most
In Florida this year, the biggest surprise in the rebate report is what's missing. Last year the largest rebate payer was Blue Cross and Blue Shield of Florida (now called Florida Blue). It paid rebates of $27 million in the small-group market, but this year the company owes no rebates in any market.
This year’s largest rebate payment in Florida is due from Golden Rule Insurance Co., a major player in the individual market. It must send out more than $20 million, according to the federal agency.
Second-highest rebate total for Florida is $11.7 million, from UnitedHealthcare Insurance Co. Both Golden Rule and UnitedHealthcare Insurance Co. are part of UnitedHealth Group, the largest single health carrier in the country and state.
The third-highest rebate total in Florida is $7.9 million in the individual market from Humana Insurance Co., Inc. A sister company that also sells to individual policyholders, Humana Health Insurance Co. of Florida Inc., must pay $3.2 million.
UnitedHealthcare’s director of public relations for Florida and the Gulf States Region, Elizabeth Calzadilla-Fiallo of Miami, sent the following statement in response to Health News Florida’s request for comment:
“UnitedHealthcare is the largest commercial health insurer in the U.S. today, providing coverage to more than 27 million individuals. The $150 million in rebates (nationally) would amount to approximately $15 per person if spread evenly across our entire commercially insured population enrolled in a plan that was eligible for a rebate. Not all plans needed to issue a rebate based on the MLR guidelines; in fact, less than 3 million people nationwide are enrolled in plans that qualified for a rebate payment.
“Premium rates continue to reflect the rise in health care costs – what physicians, hospitals, drug companies and others charge – which is what drives rate increases. As we enter 2014, premiums will rise further for many individuals because of the new fees, surcharges and essential benefit requirements under (the Affordable Care Act). For example, the total industry-wide rebates will be just over $1 billion, while new federal taxes, fees, and assessments that take effect in 2014 will total more than $20 billion.
“Also, according to the latest National Health Expenditure data, the portion of premiums allocated to health plans’ administrative costs in 2010 was among the lowest in recent years, despite the fact that health plans have been incurring new compliance and regulatory costs related to the health care reform law. According to the latest SEC data, the average profit margin for the health plan industry in 2011 was 3.2 percent – a 27-percent decrease from 2010.
“You may also want to consider that our rebate is less than one-half of one percent of UnitedHealthcare’s total annual premium collected," she wrote.