A Commonwealth Fund brief that analyzed insurance company MLR data from 2010 shows that health insurance consumers would have received $2 billion in rebates if the new medical loss ratio (MLR) rules contained in the Affordable Care Act had been in effect that year.
The rule, which went into effect Jan. 1, 2011, requires insurers to pay out at least 80 percent or 85 percent of their premium dollars for medical care expenses, depending on the type of health plan. Insurers that pay out less than the minimum MLR for their plan are now required to rebate the difference to policyholders.
According to the brief, of the $2 billion that would have been owed in 2010 had the rules been in effect, roughly $1 billion would have been rebated to about 5.3 million individual policy holders, with the other $1 billion rebated to 10.1 million people who held small- and large-group plans.
With the first rebates under ACA this summer, "these 'what if' estimates provide a rough prediction of the impact the MLR rules may have in their first year of application -- either by way of requiring rebates or by motivating insurers to reduce rates in order to avoid rebates," the brief noted.
The researchers used data from annual financial reports using the National Association of Insurance Commissioners' (NAIC) Supplemental Health Care Exhibit (SHCE). Of the insurers analyzed that had actuarial "credibility," the plans covered about 9.8 million people through individual policies, 17.8 million through small-group policies and 39.5 million through large-group insurance.
Nationally, roughly 5.3 million people of the 10.1 million with individual health plans represented about 53 percent of all people covered in this market.
The report also studied the potential rebates in each of the 50 states and estimated average rebates per person, the total number of people who would have received a rebate, as well as the total cost of those rebates.
[See also: Medical Loss Ratio Waivers: An Update]
At a state level, total estimated rebates would be the highest for Texas and Florida, with $172 million and $109 million in rebates, respectively. Rounding out the top five were Illinois ($67 million), Virginia ($50 million) and Missouri ($43 million).
Eleven states – Arizona, Florida, Georgia, Illinois, Michigan, Missouri, North Carolina, Pennsylvania, South Carolina, Tennessee and Texas have at least eight insurers that would pay a rebate. Among these states, the highest rebate per member is North Carolina with $285 and the lowest is Florida at $145 per member.
Three states, Hawaii, Rhode Island and Vermont had no insurers that would have been expected to pay rebates under the MLR rules.
"As expected, a greater proportion of consumers in the individual market would expect rebates than would those in the group markets," the report stated. "For consumers who receive rebates, the average amounts could be substantial -- often in the $100 to $300 range per person, and occasionally more."
Even with this analysis, the authors note that with the advance notice of the MLR regulations and their 2011 start date, insurers have likely changed in various ways to try to comply with the requirements. Regardless of how different insurers sought to meet the requirements, "it is almost certain that the MLR rules will produce different results in future years than are estimated here for 2010. However, even if rebates dwindle, this analysis indicates that millions of consumers stand to benefit from the new rule's reduction of profits and overhead costs incurred by many insurers," the brief concluded.