WASHINGTON — An Affordable Care Act provision crafted by Minnesota Sen. Al Franken comes to fruition Wednesday, the deadline for insurance companies to send rebate checks to policy holders if they spent too much money on administrative costs.  

Franken inserted a provision called “Medical Loss Ratio” into the health care law, requiring insurers to provide rebates to policy holders if they spend more than 15-20 percent of the premiums they collect on administrative items. The first round of rebates are due out to consumers or their employers by Wednesday.

The Center for Medicare and Medicaid Services predicts more than 123,000 Minnesotans are among those getting rebate checks, averaging $160 per household, which is right around the national average. Most of that ($8.4 million of the nearly $9 million in rebates for Minnesotans) will be funneled through individuals’ companies, though a business that receives the rebate is required to give it back to employees through rebate checks, premium offsets or other means.

Franken’s office says the MLR provision was “inspired by Minnesota’s long-standing medical loss ratio law and the state’s non-profit health insurers, which lead the nation in keeping administrative costs low.” In June, when the MLR rebate statistics were released, Franken called the rebate program “great news for consumers, who will no longer have to foot the bill for the excessive spending of their health insurance company.”

The New York Times looked at the national implications of the policy today:

…Insurers will pay out $1.1 billion this year, according to the Department of Health and Human Services, although most of it will not go to individuals. The average rebate will be $151 per household, with the highest in Vermont ($807 per family), Alaska ($622) and Alabama ($518). No rebates will be issued in New Mexico or Rhode Island, because insurers there met the 80/20 requirement.

Although the percentage of insurance companies that owe rebates this year is relatively small, about 14 percent, many giants of the industry are on the list. They include Aetna, Cigna, Humana and UnitedHealthcare. …

Self-insured employers, which cover more than half the nation’s workers, are exempt from the new rule, as are Medicare and Medicaid. And of the 75 million people in health plans subject to the rule, only about 17 percent, or 12.8 million, will get rebates this year, according to the Obama administration.

Many who buy coverage directly from insurers … are receiving checks. But in most cases rebates are being sent to employers, who can chose to put them toward future premium costs instead of distributing them to workers.

Affordable Care Act proponents see the MLR provision as one of the law’s biggest selling points, the Times reports, and it’s one the Obama administration has used to drum up support for the law.

“I want to take this opportunity to talk about exactly what it means for you,” Obama said in a June 28 press conference, basking in the Supreme Court’s decision on the constitutionality of the health care law. He listed many of the bill’s major provisions: no lifetime limits on care, no preexisting condition bans, etc.

“And by this August,” he said, “nearly 13 million of you will receive a rebate from your insurance company because it spent too much on things like administrative costs and CEO bonuses, and not enough on your health care.”

Devin Henry can be reached at dhenry@minnpost.com. Follow him on Twitter: @dhenry

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2 Comments

  1. What? A Rebate?

    No doubt there will be thousands of people confused and wondering why they got a rebate check from their insurance company.

  2. Got a Letter

    My insurance company mailed me a letter days ago explaining the rebate. No confusion here. Thanks Senator for continuing to look out for consumers.

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