Exceeding Expectations

Exceeding Expectations

The ACA’s medical-loss ratio is proving to be a big win for employers.

Who doesn’t like getting a check in the mail? I don’t know anyone who doesn’t get at least a little excited when they see an envelope with a rectangular cellophane window through which they can read “Pay to the order of … ” (although direct deposit has killed that buzz for most of us, unfortunately).

But whether the money comes electronically or through the U.S. Postal Service, the medical-loss ratio provisions of the Patient Protection and Affordable Care Acts should be putting smiles on the faces of even the most hardened business executives across the country, especially in Minnesota.

The provisions require health insurance companies to spend a minimum portion of the premium dollars they take in on medical care or activities that improve the quality of health care services. And it’s a high minimum. Health insurers in the individual or small group market must spend at least 80 percent of their premium income on medical care or quality-improvement activities; for health insurers in the large group market, at least 85 percent.

The provisions essentially prevent health insurers from taking in a lot and doling out a little to drive up profits. Those health insurers that keep more than the limit are required to rebate that money the following year to individually insured patients directly or through the source of the coverage, more often than not the employer. The rebates can come to individuals via check, direct deposit or an offset against future premiums. Employers can give the money back to their employees the same way or “apply the refund in a manner that benefits its employees,” per the feds.

Two new reports reveal that there should be a lot of checks floating around, though not necessarily in Minnesota, where to date most health insurers doing business are going beyond the law’s requirements.

The first report, from the U.S. Department of Health and Human Services, said the health insurance rebate was $332.2 million in 2013 and $504.2 million in 2012. The second report, from the U.S. Government Accountability Office, pegged the 2011 rebate at $1.1 billion. In total, that’s more than $1.9 billion in cash back for your premium dollar from 2011 through 2013. Rebates are payable to consumers and employers the year after they were accrued.

Each report provides a state-by-state breakdown on rebates paid by health insurers to consumers, directly or through their employers. In Minnesota, the rebates totaled almost $11 million over that three-year period (see chart).

HHS also makes public the amount of rebates paid by individual insurance companies selling coverage in each state. Interestingly, one insurer doing business in Minnesota, the Connecticut General Life Insurance Co., was responsible for 100 percent of the $523,254 rebate owed consumers this year for not meeting its MLR requirements in 2013, according to HHS.

For Minnesota employers, that means the state’s health insurers are doing a great job spending their premium dollars the way the ACA intended. In 2012, for example, according to the GAO, Minnesota recorded the highest median MLR percentage of any state, at 93.7 percent, meaning the median health insurer in the state spent 93.7 cents of every premium dollar on medical care or quality-improvement activities. The median state MLR percentage that year nationally was 88 percent.

Regardless of where your business is located, what the ACA’s insurance provisions have done is make sure your carrier is spending the money on the medical bills of your employees. And if they don’t, you’ll get one of those make-you-smile envelopes in the interoffice mail.

Short take

A 30-page report from the National Business Group on Health and benefits consulting firm Towers Watson shows your business is not alone, and it’s loaded with ideas on what to do about it. The report is based on a survey of nearly 600 employers representing 11.3 million full-time employees. Of those employers, 18 percent have developed a new health care benefits strategy for 2015, with another 57 percent planning to do so. What are the most aggressive companies drawing up? The top three strategies are: creating financial incentives for employees to use high-performance provider networks; offering telemedicine benefits to encourage things like e-consultations with physicians and remote health monitoring; and installing value-based insurance design features in pharmacy plans to incent more effective use of medications.


In the July column, we wrote about the interest among health plans and employers in value-based insurance design, or VBID (also see Short Take, above). Essentially, payers can use VBID to make it cheaper for enrollees and workers to use medical treatments proven effective for their health problems and make it more expensive for them to use treatments that don’t improve their health status. Now the federal government is interested. In July, bipartisan legislation was introduced in Congress that would allow Medicare Advantage plans, or managed-care plans that enroll Medicare beneficiaries, to use VBID to tweak beneficiaries’ copayments and deductibles to steer them toward care that produces better results, particularly for patients with chronic medical conditions. As Medicare goes, so goes the private health insurance market. If the bill passes, it won’t take an actuary to figure out how quickly VBID will spread in the private sector.

David Burda (twitter.com/davidrburda, dburda@msp-c.com) is editorial director, health care strategies, for MSP-C, where he serves as the chief health care content strategist and health care subject matter expert.