Aug. 07--Health insurers are issuing $8.9 million in rebates to Minnesota customers this summer -- a smaller sum than the $14.6 million that companies projected they would provide back in April.
The rebates are required by the 2010 federal overhaul of the nation's health care system, which set a limit on the share of premium revenue that health insurers could dedicate to administration, marketing and profit.
"It looks like there were a few insurers that significantly overestimated their rebates," said Cynthia Cox, a policy analyst with the Kaiser Family Foundation, which in April published a report tabulating rebates based on insurers' preliminary estimates.
The limits in the federal statute were based on regulations that have been place in Minnesota since 1993, said Sen. Al Franken, D-Minn., during a news conference Monday, Aug. 6, at the state Capitol.
The state, however, did not require insurers to issue rebates but instead took the limits into consideration when approving health plan rates.
"This past month, 123,000 Minnesotans benefited from rebates that insurance companies have to give," Franken said. "Eighty to 85 percent of premiums have to be applied to actual health care -- not administrative costs, not profits, not marketing, not CEO salaries or bonuses."
Insurers had to issue rebates by Aug. 1. Franken timed his news conference to the release Monday of an annual state report on the issue -- known as the medical loss ratio -- by the Minnesota
Department of Commerce.
Among insurers issuing rebates in Minnesota, Bloomington-based HealthPartners provided the most at $6.8 million. That was down from the $12 million in rebates the health insurer projected in April.
The actual rebate amount came in lower because fourth quarter claims costs were greater than expected, said Jeff Shelman, a spokesman for HealthPartners.
The medical loss ratio takes the amount an insurer spends on health care claims costs plus spending on quality improvement and divides the sum by the company's overall premium revenue (after adjusting for taxes and regulatory costs). The idea is to make sure that insurance companies spend most of the premium dollars they collect on health care costs, Franken said.
The rules on medical loss ratios were part of the Affordable Care Act, which Congress passed in 2010. They've been controversial with insurance companies.
"This regulation places as arbitrary cap on what health plans can spend on a variety of programs and services that improve the quality and safety of patient care, help patients navigate a complicated delivery system and help control soaring medical costs," said Robert Zirkelbach, spokesman for America's Health Insurance Plans, in a statement prepared from the Washington D.C.-based trade group.
People who purchased individual insurance policies are receiving rebates directly from their insurance company. In Minnesota, three companies in the individual market are issuing nearly $500,000 in rebates.
HealthPartners is issuing rebates to customers in the fully insured large group market, meaning groups of 101 or more people, said Shelman, the company spokesman. Rebates are going to 221 out of nearly 7,000 employer groups, he said, adding that about 121,000 people are covered by those HealthPartners plans.
"The average rebate is $56.17 per member," Shelman said in a prepared statement. "That is $4.68 on a per member, per month basis."
"We will issue the refunds to the employers and not the individual employees (as the law requires)," he added. "The employers make the decision on what to do with the refund. Employers can use the money to offset premiums, to fund health and well-being activities or they can refund the sum to their employees."
A subsidiary of Connecticut-based Cigna Corp. is providing $1.6 million in rebates to large group customers in Minnesota, according to the federal government.
The average rebate on a per-member basis in Minnesota is about $73. The number is bigger on a per-household basis at $160, according to the Minnesota Department of Commerce.
Nationally, the average rebate per household is about $151, according to the Commerce Department.
Christopher Snowbeck can be reached at 651-228-5479. Follow him at twitter.com/chrissnowbeck.
(c)2012 the Pioneer Press (St. Paul, Minn.)
Visit the Pioneer Press (St. Paul, Minn.) at www.twincities.com
Distributed by MCT Information Services