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State fights $60M in consumer rebates

Floridians could miss out on an estimated $60 million in health-insurance rebates next year if state officials successfully block enforcement of spending rules in the year-old reform law.

About 340,000 Floridians would likely qualify for the rebates, if they go through, based on data from last year.

But Florida’s Office of Insurance Regulation has sought a waiver of the rebates for companies operating in this state. After attempts at a total waiver went nowhere, OIR on June 28 sent a revised request for a phase-in of the spending limits over four years for companies selling individual policies.

Consumer groups are angry, accusing OIR of protecting insurers at the expense of the public. In a May 25 letter to the Department of Health and Human Services, five of them asked for a public hearing .

“The insurers don’t need the money, they’re just maximizing their profits,” said Walter Dartland, executive director for Consumer Federation of the Southeast.

The Patient Protection and Affordable Care Act says that if companies spend too little on patient care – the so-called “medical-loss ratio,” or MLR – they have to pay that money back to customers.

OIR at first sought a near-total waiver of the MLR rules, but that wasn’t going to fly. Now OIR’s petition calls for a phase-in over four years for companies in the individual-coverage market.

If the waiver is granted, limits on MLR in Florida’s individual market would be 68 percent for this year, 72 percent next year and 76 percent in 2013. Not until 2014 would companies have to comply with the provisions of the 80-percent spending rule in the act.

A Health News Florida analysis of documents that Florida OIR filed with HHS suggests that:

--Customers who have the most riding on the HHS decision are the 118,000 individual policyholders of Golden Rule Insurance Co., a subsidiary of the giant United Health Group. Estimates based on data from 2009 and 2010 indicate that if the Obama administration doesn’t grant a waiver, Golden Rule would owe Floridians $32.8 million next year.

Golden Rule spokeswoman Ellen Laden said the MLR for any given carrier can vary widely from state to state, depending on long it has been operating and what it claims experience is.

"If we don't achieve the minimum MLR in any state in 2011 and beyond, our customers in that state will receive a refund," she said.

--The other half of the $60 million in rebates would likely be split among 11 companies that haven’t been meeting the law’s spending guidelines in the past two years, estimates show. Companies that are likely to have to pay multimillion-dollar rebates include Connecticut General, Humana, Coventry and Preferred Medical Plan.

--Some Florida insurers in the individual market – including Aetna and mammoth Blue Cross and Blue Shield –were well within the law’s spending rules in recent years and would be unlikely to have to pay rebates even if the waiver isn’t granted.

To Richard Polangin, health policy coordinator for Florida Public Interest Research Group, that’s significant. “If Blue Cross and Aetna can comply with federal law the others ought to be able to, too, or offer a justification why they can’t.”

However, Carol Taylor, media relations chair for Florida’s chapter of the National Association of Underwriters, said there are often legitimate reasons for high administrative costs and comparatively low medical spending.

Companies in a high growth stage, signing up many new customers, will have screened out those who have medical risks. The ones that are accepted tend to be healthy in the early years of their policies, she explained, so the medical spending would be below average..

In the documents that Florida sent to HHS, the identity of some of the companies, including Golden Rule, was masked.  Florida law allows anonymity if the company claims the documents contain trade secrets.

However, Health News Florida was able to identify the companies by patching together information contained in several documents from OIR and state databases.

Florida officials have turned down similar sums of money attached to the federal health law they hate and are trying to get thrown out as unconstitutional. But in those cases, the state was rejecting federal grants..

This time, the money doesn’t come from taxpayers, but from insurers. Those who would receive the money are self-employed workers and others who don’t have access to a group plan.

Carol Gentry, founder and special correspondent of Health News Florida, has four decades of experience covering health finance and policy, with an emphasis on consumer education and protection.