by SRA Benefits
The Kaiser
Family Foundation just released a study estimating that insurers will provide
policyholders close to $1.3 billion in medical loss ratio (MLR) rebates in
August of this year. SRA Benefits studies of Missouri and Kansas insurers
suggest that several carriers will be issuing rebates in our markets but some
policyholders expecting refunds might be surprised when no money arrives.
The PPACA
(National Healthcare Reform) provides that insurers must issue rebates to
policyholders if their ratio between expenses and what they actually pay
providers is better than the new law allows. For small group and individual
plans insurers cannot keep excess premiums when they pay less than 80% of
premiums to medical providers; they cannot keep excess premiums when they pay
less than 85% of premiums for large groups. The rest must be refunded to policyholders. However, with this first round of rebates, what is counted and how
it’s counted creates a confusing array of issues that each insurer’s actuaries
and accountants must address.
Preliminary
information and disclosures from insurers to the National Association of
Insurance Commissioner (NAIC) show a wide range of results for our local
markets by type of plan, insurance company and state. SRA also found a wide
range of differences in how insurers are interpreting the regulations as well
as significant challenges due to ways in which carriers are structured for tax
and business purposes. This is not a reflection of insurers with evil intent
but a reflection of very complicated accounting and legal issues. Because there
are so many variables, each insurer will likely make different decisions as to
the regulations based on their individual situation. In addition, the information publicly
available today through the NAIC is different than the actual forms and
submissions that will ultimately be submitted to Health and Human Services
(HHS).
Insurers are
scrambling to make last minute revisions before final submissions are due to
the Federal government June 1, 2012. Once the announcements come out, the lucky
policy owners will be waiting for their refunds in August of this year.
Don’t hold
your breath until you actually get a refund in the mail. With different rules
between state and federal regulations, some policy holders may be excluded or
in a different pool than they believe. As an example, you may have small group
rates and benefits but be a large group under the law. And insurers may choose to reduce future
premiums in lieu of cash refunds. As your broker, SRA Benefits stands ready to
help you understand the refund process and its implications to your company.
Why would
you need advice? If you happen to be a
lucky employer and qualify for a refund it will be your turn to figure out what
to do with it. Once employers find out
the options and requirement on what is to be done with the money, they will
have a glimpse of the challenges insurers face.
