Aug. 02--More than 16,000 West Virginia insurance customers are receiving rebates after companies billed them more than they are allowed to under the terms of the new federal health care law.
A little-known provision that Sen. Jay Rockefeller, D-W.Va., inserted into the law prevents companies from spending more than 20 percent of their revenues on administrative costs.
Instead, companies must spend at least 80 cents of every dollar they receive directly on health care-related expenses. Rockefeller backed the provision because he thought some companies were spending too much to pay administrators or shareholders.
Because of the provision, 16,434 West Virginian customers will share $2.7 million in rebates this year from six health insurance companies, according to the U.S. Department of Health and Human Services. That's an average rebate of $374 per customer.
Customers should be receiving checks, reimbursements to their accounts or future premium reductions. According to the health department, rebates were to be paid by Aug. 1.
Rockefeller hailed the rebates.
"For too long, some health insurance companies have been raising their prices, not to pay for needed medical care, but to run up higher profits," he said through a spokeswoman.
Rockefeller said insurance companies should be spending money on medical care and not on "fancy buildings, executive salaries, and company profits."
Nationally, 12.6 million Americans shared $1.1 billion in rebates this year, an average of $151 each.
Most of the rebates went to people who buy their own health insurance without help from an employer or to people who are in small group plans that are typically used by small businesses.
The individual market and small group plans are typically more expensive because it costs companies more to insure individuals rather than large groups of people.
In West Virginia, $2.3 million was returned to customers in the individual insurance market, according to the U.S. health department. Those are people who buy their own health insurance without the help of their employer.
The remaining $400,000 went to customers in the small group market.
No rebates went to state policyholders who receive insurance through large employers.
The six companies that had to return money are Carelink Health Plans, Coventry Health and Life Insurance Co., Golden Rule Insurance Co., The MEGA Life and Health Insurance Co., Time Insurance Co., and UnitedHealthcare Insurance Co., according to the U.S. Center for Consumer Information and Insurance Oversight.
A spokeswoman for Time Insurance's parent company said the company over-charged state customers because health care costs and use can "fluctuate significantly from year to year and market to market." The company returned $913,000 to customers in the state.
"Rebates paid to customers in West Virginia will reflect the health care claims that Time Insurance Co. has experienced in the state," company spokeswoman Sue Pierman said in an email.
"We remain committed to setting premium rates at a level that will allow us to continue to serve the needs of our customers."
Late last year, Highmark Blue Cross Blue Shield preempted having to pay rebates this year by cutting its December premiums by 75 percent. Instead of collecting $14 million in December premiums from its 4,200 small group customers in West Virginia, the company collected only about $3.5 million, according to Rockefeller's office.
Still, the rebates may do little to offset rising premiums, particularly in the individual market.
West Virginians who buy their own health insurance pay about $333 a month, one of the highest averages in the country, according to 2010 data from the Kaiser Family Foundation.
In a recently released survey of insurance agents, Kaiser found many of them expected individual market premiums to increase 10 percent or more this year, which is about $400 a year for West Virginia.
Formally, the number at issue -- the amount of money companies spend on medical care versus how much they spend elsewhere -- is known as the "medical loss ratio." It's also known as the "80/20" rule.
Perry Bryant, head of West Virginians for Affordable Health Care, expects the medical loss ratio provision to save consumers in the long run.
"People frequently say, 'Why is health care so expensive in the United States than in other countries?' One of the reasons is we have a much higher administrative cost than any other country in the world," Bryant said.
"Medical loss ratio will tend to dampen that and really require insurance companies to be much more efficient than they have been in the past, so I think these numbers are fairly significant."
Contact writer Ry Rivard at firstname.lastname@example.org or 304-348-1796. Follow him at www.twitter.com/ryrivard.
(c)2012 the Charleston Daily Mail (Charleston, W.Va.)
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