Intended to stem large spending on administrative costs and dividends for shareholders, the medical-loss ratio stipulates that health plans in individual and small group markets must spend at least 80% of premium dollars on healthcare and efforts that improve care quality. That figure is 85% for insurers in the large group market. Companies that don't meet the standard must refund the difference to their members.
The average medical-loss ratio refund per family in 2013 was $80. Insurers can dole out rebates in one of four ways: a check in the mail, a reimbursement into a consumer's insurance account, a reduction in next year's premium or a lowered benefit cost for employer-sponsored plans.
“We are continuing our work on building a sustainable long-term system, and provisions such as the 80/20 rule are providing Americans with immediate savings and helping to bring transparency and accountability to the insurance market over the long term,” HHS Secretary Sylvia Burwell said in a release.
The trade group America's Health Insurance Plans has argued that the MLR rule excludes legitimate administrative costs such as fraud detection and does nothing to address the costs of healthcare services that drive premium rate increases.
The guidelines are still somewhat nebulous, particularly for premium dollars that go toward care-quality efforts, said Julie Nielsen, a healthcare director at consulting firm Berkeley Research Group. Quality improvement activities for insurers generally include information technology investments, utilization reviews and other means that promote wellness or boost health outcomes—but those areas are broad.
“What's unclear so far is the standards that are being applied to define the quality improvement expenditures,” Nielsen said.
She added, though, that the ACA's medical-loss ratio is better defined than previous 80/20 rules, one of which led to fraudulent behavior. Florida's Medicaid program previously had a statute that required all managed-care plans to spend at least 80% of premiums on patient care. Several executives of one company, WellCare, were sentenced to prison this year after the government found they inflated behavioral health expenditures to avoid refunding money.
Nearly 100 companies refunded at least $1 million. Blue Cross and Blue Shield of Florida refunded the most, giving back more than $10.1 million to its members. Neighborhood Health Plan, a health plan run by Boston-based giant Partners HealthCare, issued more than $6 million in rebates. Several subsidiary plans within UnitedHealth Group, Aetna, Humana and Cigna were also among the big refunders.
States that reported the highest medical-loss ratio refunds in 2013, according to HHS' report, were Florida, Maryland, Massachusetts and Missouri. Florida alone accounted for 12.5% of all rebates in 2013. More than 6.8 million Americans benefited from a rebate.
A U.S. Government Accountability Office report from this month found 76% of insurers met or exceeded the minimum MLR standards in 2011 and 2012.
