Over 208,000 Mass Consumers Getting $15 Million in Insurer Rebates
The "Medical Loss Ratio (MLR)" rule is the horrible name for a very good idea - assuring good value for your premiums. The law guarantees that health insurers use almost all of the premium dollars they collect for health care benefits for their subscribers. This has the effect of limiting how much insurers can retain to spend on administrative costs like overhead and marketing.
Under the ACA, insurers in the large group market need to spend at least 85% of their premium revenue on health care, including quality improvements. For the small group and indivudal market, Massachusetts exceeds the ACA standard of 80% by requiring these insurers to spend 90% of their premiums for health care (the 90% standard goes to down to 88% over time).
And here's the best part: if an insurance company fails to meet this standard, it is required to pay the difference in the form of refunds. These refunds can be paid directly to the consumer or paid indirectly through the consumer’s employer.
For Massachusetts, new federal data show that 208,751 insurance customers here will be receiving just over $15 million in rebates for 2013. The largest payers of refunds in Massachusetts are Neighborhood Health Plan, which will return just over $6 million; Fallon Community Health Plan, at $4.2 million; and Tufts HMO, at $2.9 million (see full list by health plan here).
Surprisingly, Massachusetts ranks third in the amount of money refunded to consumers, behind only Florida at $41.7 million and Maryland at $17.3 million. The average refund per family in Massachusetts is $133.
We don't view the MLR rule as a penalty on bad insurers, but as a tool to make sure that premiums are reasonable, even if one has to make after-the-fact corrections. The MLR rule is also causing health insurance companies to lower their premiums, so consumers are saving money even before the refunds. The Federal Department of Health and Human Services estimates that the rule has saved consumers approximately $9 billion since its implementation in 2011.
In announcing the rebates earlier, Governor Patrick said, "These rebates are all about helping small businesses and consumers reduce their health care costs." We agree.
- Jessica Maskin