Health Insurance Companies Forced to Pay Back Millions to Consumers

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Jul 27th, 2012

Affordable Care Act puts money in the pockets of Kentucky consumers and businesses

Health insurance companies will be reimbursing nearly 250,000 Kentucky consumers and businesses over $15 million dollars because they spent too much money on executive compensation and administrative fees instead of health benefits, according to insurers’ filings with the federal government announced earlier this month.  Employers and businesses have reported already receiving rebates from insurers, which average $114 per family in Kentucky.  Rebates must be sent by August 1, 2012.

The new requirement is based on a figure referred to as “medical-loss ratio” or MLR. This provision requires health insurers to pay a minimum percentage of premium dollars toward health care expenses and quality improvement activities, limiting the amount spent on administrative and marketing costs and corporate profit.

According to the law, large group plans must spend at least 85 percent of their premium dollars on health care and quality improvement activities. The minimum is 80 percent for small groups plans.  In Kentucky, the ratio is slightly reduced to 75 percent for 2012 but will return to the 85/80 percent for 2012.  Any funds spent in excess of these minimums must be refunded back to consumers in the form of rebates.

“This will ensure that consumers get the best value for their health care dollars while increasing transparency and accountability” said Jodi Mitchell, Executive Director of Kentucky Voices for Health. “Simply put, this means more money going to provide patient care and quality services.”

Kentuckians who are on individual insurance plans can expect to see these rebates arrive in the form of rebate checks or premium credits applied toward the current year’s premiums.  Rebates for group plans will be refunded to employers with those savings then passed along to employees. Insurers that do not owe a rebate for 2011 are required to notify their subscribers that they met the MLR standard.

Health insurance companies currently owe a total of $1.1 billion to 12.8 million consumers and businesses nationwide. Of that, more than $15 million dollars will go back into the pockets of nearly 250,000 Kentuckians averaging in a $150 rebate per family. (http://www.healthcare.gov/law/resources/reports/mlr-rebates06212012a.html)

“The MLR provision in the health reform law is putting money in the pockets of Kentucky families and businesses at a time when they can really use it,” said Mitchell, “This is a tangible benefit for consumers and small businesses.  It will strengthen our healthcare system and make health care more affordable by holding insurance rates in check.”

Kentucky Voices for Health is committed to educating Kentuckians about those measures that stand to positively impact the health care landscape in Kentucky. Among our top priorities is improving access to affordable care.   This provision will also improve efficiency and effectiveness in the system by making the spending habits of insurers more transparent.

Kentucky Voices for Health is a broad coalition of nearly 250 organizations and individuals working to improve Kentuckians’ health and health care coverage.  Kentucky Voices for Health has been supported by the Public Welfare Foundation and in part by the Foundation for a Healthy Kentucky. 

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