Americans across the country may be pleasantly surprised to get a small check from their health plans this summer, but insurers may need to plan better if they want avoid an administrative hassle.
This year, some 6.8 million consumers are receiving an estimated $330 million in insurance refunds because their health plans failed to meet the new medical cost ratio rules, mandating that 80 percent of premium revenue be devoted to medical services or quality improvement and 20 percent left to administration, marketing and profits (or a ratio of 85/15 for large group plans).
Paybacks to consumers under the MCR regulations have reached $1.9 billion in the first three years of the nationwide MCR system, according to the Department of Health and Human Services.
The average family will get about $80 in refunds this year, whether as a check, a reimbursement to an account, a reduction in future premiums or through an employer.
Of the $330 million being paid back nationally this year, insurers in Florida will be refunding the most -- more than $41 million, half of it by Florida Blue, the state's largest insurer, according to the federal data.
The state with the second most refunds being issued is Massachusetts, a state of only 6.6 million but with $15 million in rebates due. Almost half of that amount, $6 million, is being paid by Neighborhood Health Plan, the managed care plan owned by Partners HealthCare; Fallon Community Health Plan is paying $4.1 million and and Tufts is paying $2.9 million.
While insurers have still been paying out millions in refunds -- $13.6 million in Texas and $12 million in New York just last year -- more than 75 percent of insurers met or exceeded the standards in the first two years, and in 2013, 87 percent did, according to HHS.
Improved compliance
Since the beginning of the MCR, 82 percent and 88 percent of small and large group plans, respectively, have met the standards, although the individual market has been the straggler. In the first year, only 62 percent of plans met the 80/20 MCR. That's improved significantly, to the point where last year 81 percent of individual plans were MCR compliant, along with 84 percent of small group plans and 95 percent of large group plans.
Administrative costs as a percentage of premiums have also been on the decline, from an average of 13.1 percent across all markets in 2011 to 12 percent in 2012 -- although that increased to 12.2 percent in 2013, increasing a few tenths of a percent in both the small and large group markets, as the individual market brought the most declines in the proportion of administrative spending. With growing membership, the individual market as a whole saw overhead decline from 15.3 percent in 2011 to 13.4 percent in 2012 to 11.5 percent last year.
As that individual market expands even more to low and middle income populations, HHS Secretary Sylvia Mathews Burwell argues that the MCR trends are having a salubrious effect.
"We are continuing our work on building a sustainable long-term system," she said in a media release. "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."