Best Results Organizing

It’s very rare that a Paper Doll blog post is so intricately tied to the news. After all, the subject of organizing is generally more timeless than timely. At a period where so many people are struggling to organize their finances, especially in light of rising health costs, I’m hopeful that this today’s post, accurate at the time of writing, will prove informative and useful.

Whatever the Supreme Court announces this week regarding the decision on the “mandate” element of the Affordable Care Act, you may still be in the running to receive an important piece of mail sometime in the next five weeks: a rebate check from your insurance company.

The multi-part, controversial Act includes a variety of provisions, from guaranteeing access to insurance for persons with pre-existing conditions to covering more preventative care, from helping states crack down on unreasonable insurance premium hikes to allowing young people to stay on their parents’ health insurance for longer periods of time.

In addition, the Act holds health insurance companies accountable to consumers. As part of that, it guarantees that Americans will be reimbursed if and when health insurance companies don’t meet “a fair standard of value.”

A FAIR STANDARD OF VALUE

All health insurance companies are now required to spend, on average, at least 80% of subscriber premiums on actual medical care (i.e., payment to physicians, hospitals and other care providers or reimbursement to enrollees for such care, as applicable), instead of on overhead (like marketing, advertising, CEO bonuses, fancy office parties, etc.) and corporate profits.

As a result, health insurers have to submit data regarding the proportion of premium revenues they’ve spent on “clinical services and quality improvement.” This is called the Medical Loss Ratio (MLR). The insurance industry calls it that because it’s the percentage of the premium considered “lost” to insurance companies. From the industry’s philosophical perspective, there’s no benefit from the actual provision of health care. (It’s much like if a private university referred to the money spent actually educating undergraduates as an educational loss ratio.)

The National Association of Insurance Commissioners (NAIC) was responsible for standardizing definitions and methodologies for figuring out which services constitute clinical services and quality improvement, but the Department of Health and Human Services got final say on some questionable definitions. For example, the NAIC wanted to count insurance agent commissions as health benefits rather than overhead. 

ARE YOU ELIGIBLE?

The amounts of these rebates will vary by state, insurer and how a subscriber’s insurance has been acquired. For individual plans purchased directly from an insurance company, such as what Paper Doll acquires as a self-employed individual, and for “small group” plans (companies with fewer than 50 employees), insurance companies can only spend up to 20% of insurance premiums on administrative expenses.

For “large group” policies, employees of larger companies (anywhere from those with 50 employees to those of Walmart, America’s largest employer) can spend no more than 15% of premiums on non-health care expenses.

Also, six states have special circumstances. In Georgia, Iowa, Kentucky, Nevada, New Hampshire, and North Carolina, insurance companies were allowed to meet a slightly smaller medical loss ratio to keep the insurance markets there from “destabilizing.” States had to demonstrate that requiring insurers in an individual market meet the 80% MLR would result in fewer choices for consumers.

Hawaiians won’t be getting a rebate, as all health insurers in that state met the medical loss ratio requirements in 2011.

Those who are insured via public programs, like seniors covered by Medicare and individuals covered by Medicaid, will not receive rebates, as those programs already apportion well more than 80% of funds to actual medical care. (Indeed, unlike big insurance companies, for Medicare Parts A and B, only a thrifty 3% of premiums are spent on administrative costs.)

Also, Medicare supplemental policies (like Medigap) have different standards applied (65% for individual policies, 75% for group policies). These programs are also not expected to owe rebates to their customers.

And, assuming the Affordable Care Act is not reversed in its entirety, all of us who pay taxes should be pleased to note that, as of 2014, insurance companies participating in Medicare Advantage plans will have to spend 85% of funds on actual healthcare costs or will have to refund the federal government any “wasted” tax dollars. Plans that miss the 85% limit three years in a row won’t be allowed to accept new enrollees; if they miss it for five years, they won’t be allowed to operate at all.

REALITY CHECK

The Kaiser Family Foundation, a non-profit health policy analysis and health journalism group, analyzed the 2011 data collected by the National Association of Insurance Commissioners. The Kaiser study projects that approximately one-third of consumers who purchase their own insurance will get rebates, as will about 28% of insured small businesses employees and about one-in-five employees covered by large group policies.

If you purchase your own insurance and don’t get a rebate, it’s not exactly bad news. Just like an IRS refund means you’ve been giving a tax-free loan to the government all year, a rebate means you’re getting money back because your insurance company spent too much of your premium (as defined by federal regulations) on things that won’t improve your health.

HOW PAYMENTS WILL BE MADE

If you paid for your own insurance, you will be reimbursed:

–by a refund check delivered by August 1, 2012; or

–by a lump-sum reimbursement to whatever credit card or debit card account was used to pay the premium; or

–via a reduction in whatever next monthly premium payment is due after August 1.

Whether or not you are actually owed a rebate, your insurer is required to alert you to the fact, in writing, by August 1, 2012, so watch your mailbox.

You may be wondering what happens if your employer deducts funds from each paycheck to pay for your portion of your premiums. Generally, health insurance companies will rebate the money to employers. However, since employers usually cover 70-80% or more of employees’ (or employees’ families’) full premiums, employers will be expected to refund amounts based only on the percentage of the whole premium that each employee paid.

So, if your insurance is a perk for which you pay nothing, you’ll get nothing back. If you kick in some portion of the premium for yourself, or you’re covered for free but pay extra for your dependents to be covered, your employer should return a portion of the rebate based on what was deducted from your checks in 2011.

HOW MUCH WILL YOU GET?

Last week, the Department of Health and Human Services announced the final amounts that health insurers will have to refund. $1.1 billion in rebates will be apportioned to 12.8 million Americans. Although the average American family will receive about $151, the word average may be deceptive. For example, according to Healthcare.gov, it’s estimated that per-family subscribers in Mississippi ($651), Alabama ($582), Maryland ($496), and Delaware ($461) will see the highest rebates. Obviously, to meet an average of $151, that means some rebates will be very tiny.

If you can’t wait until August 1 to know your share, you can try to estimate your little windfall by using the following sites.

Consumers Union (the people behind Consumer Reports Magazine) created a map which lists the insurance companies expected to owe rebates (based on companies’ prior self-reports). Consumers Union also put together a Health Insurance Refund List to show state by state lists of major insurance companies’ total rebate amounts for individual, small and large group markets. Still, unless you know how many insured persons or families make up each group, it’s difficult to estimate how much you’ll receive.

For a better guess, refer to the federal government’s Estimate of Total Rebates in All Markets for Consumers and Families, by State list — scroll down to the charts for Appendix I, II and III.

NO TIME MACHINE

Unfortunately, even if your insurance company’s executives have been having beach parties in Fiji on your nickel since the days of Duran Duran, the rebate is not that retroactive. The rebates issued during July 2012 are solely for overages on insurance premiums that you paid in 2011.

In theory, the Supreme Court’s decision on the mandate portion of the Affordable Care Act, alone, should not impact whether insurers will still be limited to spending an average of 80% of premiums on health care, but it remains to be seen what other changes to the Act, in whole or in part, may be in store. As of this writing, it’s expected that that the Supreme Court’s decision will be announced this Thursday, June 28, 2012. Until then, at least, Paper Doll will be keeping an eye on the mailbox.