One of the goals of the Affordable Care Act is to cut the cost of health insurance administration. And to do that, the law sets limits on how much companies can spend on things like bonuses, salaries and marketing.
Failure to meet those limits could result in a refund for consumers.
But Oregonians might not want to count on that refund just yet.
Up until now, it’s been health insurance companies that have decided how much of the money you pay them goes to health care — and how much goes to salaries, marketing and other overhead costs.
Essentially, it’s a financial balancing act between making a profit and keeping consumers happy.
The official term for the split is the ‘medical loss ratio.’ And now, the Affordable Care Act says the ratio has to be 80/20 or better — that is at least 80 percent of the monthly premiums should go to health care and 20 percent to administration. For large insurers, it’s 85/15.
Teresa Miller: “In some cases I think we’ve seen medical loss ratio as low as 50 percent and obviously that just means consumers are not getting good value for their dollar.”
Teresa Miller is with the Department of Health and Human Services, Center for Consumer Information and Insurance Oversight. She says 50/50 splits happen where there’s only one insurance company in an area, or perhaps where there are two but they’re not really competing.
“The 80/20 rule is really one way the Affordable Care Act ensures that consumers receive fair value for every dollar they spend in health insurance premiums.” says Miller.
To enforce the 80/20 rule, every health insurance company in the nation has had to submit its figures to the feds. And if they don’t meet the rule, they then have to give rebates.
“The rebate amount will really depend on how much a particular insurer fell below that required threshold. So, it’s going to vary based on markets and based on different states. But we do hope to be publishing the information about the data that we collected very soon. And that information will include average rebate amounts by state and by market.” states Miller.
So: What about Oregon? Are we going to get any rebates?
Cheryl Martinis explains: “We don’t know how many companies may be making rebates later this year, but we expect there to be few if any Oregon companies.”
Cheryl Martinis is with the Oregon Insurance Division. She states: “Oregon’s lucky to have one of the most competitive insurance markets in the country. And that helps keep profits and administrative costs in line. I mean you’ll see very few states where more than half a dozen companies actively vying for a piece of the health insurance market, and Oregon has that.”
A quick look at Oregon Insurance Divisions’ figures from previous years shows Kaiser usually spends 96 percent of its premium on health care; ODS averages 91 percent; Providence averages 88 percent, and LifeWise averages 84 percent.
So that means Oregonians aren’t likely to get an insurance refund.
It also means that a number of those Oregon health insurance companies aren’t that bothered about the new federal dictate.
Jonathan Nicholas from ODS says: “We’re pretty comfortable with these sorts of standards. It’s no problem of course for us to meet them. It’s no problem really for most of us in Oregon in this business, you know, as we all like to say, if everyone practiced health care as we practice it here in Oregon, we’d all be a lot better off.”
In many states however, insurance companies are not happy.
The group America’s Health Insurance Plans is a trade organization that represents the health insurance industry. On its website, the group says the new requirement puts coverage at risk; hurts efforts to improve quality and root out fraud; inhibits innovation; reduces access; and increases administrative costs.
Meanwhile, Cherill Martinis of the Oregon Insurance Division says you shouldn’t be too upset if you don’t get a rebate.
“It’s good not to get a rebate because it means the companies are already spending these required amounts on medical care, as opposed to administrative costs. The same with a tax return. If you get money back, it means the government’s had your money.” says Martinis.
Oregon has several smaller insurance companies that could fall afoul of the 80/20 rule. But, if you’re one of their customers, you still might not get a check. If you get your insurance through work, the money goes back to your employer. That money is meant to be used for the benefit of employees.
Meanwhile of course, the U.S. Supreme Court is about to rule of the constitutionality of the Affordable Care Act. So if these insurance requirements are thrown out, all bets are off.
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