The Department of Health and Human Services is working to carry out a key piece of the Health Reform law that requires insurance companies to pay rebates to consumers if most of their premiums aren’t spent on their health care.
The law requires insurance companies to spend at least 80 percent of a consumer’s premium on the customer’s medical care, rather than administrative costs or advertising. Large insurance companies have to dedicate 85 percent of a consumer’s premium to medical coverage.
HHS estimates up to 9 million Americans could be eligible for rebates starting in 2012, worth up to $1.4 billion. Average rebates per individual could be $164, mostly people who buy their own insurance and are not part of a company plan.
Though health advocacy groups and federal officials agree the new law provides important consumer protection, it’s also a monumental task for HHS to implement. HHS officials said they’re still working out a plan for how the agency will accomplish the various steps and details associated with the new measure, for which the final rule went into effect Dec. 2.
The revised rule – known as the Minimum Medical Loss Ratio (MLR) — ensures that individuals and employees know their rights and actually receive rebates for the failure to follow the law.
“This rule is one of the very important consumer protection requirements in health reform that is having a real world impact today for consumers,” CCIIO director Steve Larsen told Breaking Gov.
HHS must prepare to help insurance companies file mandatory expense reports by June 1 so that consumer rebate checks can be in the mail this summer. But officials said they are still deciding on details of how that will be done, including the amount of federal workers and possible technology involved.
The first step: HHS’s Center for Consumer Information and Insurance Oversight (CCIIO) will offer tips to insurance companies on how to file expense reports in January.
The agency must also publish the insurance reporting forms and work with consumer groups, employers and issuers to make sure everyone is ready for reporting and delivering the rebates in 2012. The blueprint for this review process is still being worked out. The required forms will be published in the Federal Register with links on how to file the data electronically.
There are four general categories that will have to be reported: Claims information, money spent on quality improvement, administrative costs and taxes. That basic information will be used by actuaries, accountants and lawyers at CCIIO to verify an insurer’s calculations that at least 80 percent of a customer’s premium is directed to paying medical expenses.
The reports will be posted publicly so residents of every state will have information on the value of health plans offered by different insurance companies in their states.
“The idea is that health insurance companies shouldn’t be spending more than 20 percent on non-medical expenses and administrative costs,” said Leslie Quincy, senior health policy analyst with Consumers Union, which monitors many issues related to consumers.
The majority of these rebates will be sent to people who buy coverage on their own, not in a company plan, “folks who could certainly use a helping hand,” Quincy said.
“Even if insurers decide to lower their premiums in order to avoid paying the rebates, consumers still win,” she added.
Sondra Roberto, staff attorney for Consumers Union, said it’s important that easy-to- understand rebate notices are sent to consumers.
“We look forward to future guidance that makes certain notices are written in a consumer-friendly and easily understood manner,” Roberto said.
Larsen said the rule already has had a positive impact on some insurance behavior.
Aetna, a major health insurance company, announced recently they were lowering their premium rates after taking steps to lower administrative costs.
“That’s the kind of statements we would expect under the law to have an impact on consumers,” Larsen said.