Thousands of Minnesotans to receive health rebates under Franken provision

Thousands of Minnesotans to receive health rebates under Franken provision

If the recent U.S. Supreme Court decision didn’t signal that at long last it’s time to actually get to know the Affordable Care Act, then perhaps the appearance of a check in the mailbox will get John and Jane Q. Public’s attention.

Thanks to a part of the reform authored and sponsored by Sen. Al Franken, DFL-Minn., 123,000 Minnesotans will soon receive a share of nearly $9 million in rebates from their health-insurance carriers. Checks will average $160 per family.

Nationwide, the wonkily named “medical loss ratio” provision will mean $1.1 billion in rebates for nearly 13 million Americans.

“There’s a lot of great stuff in this law,” Franken said in a release issued in the wake of the court’s order upholding the ACA. “Health care will now be more affordable and accessible for millions of people in Minnesota and across the country. This is a good day for the people of Minnesota.”

The medical loss ratio provision is just one of three strong parts of the ACA authored by Franken; the other two, the Value Index and the Diabetes Prevention Act, are complicated enough to merit parsing in another story.

All three patient-friendly provision are buried in the most controversial — and complex — piece of legislation of the junior senator’s tenure. Between that complexity and the law’s iffy chances of full implementation, few people have bothered to try to learn about its multiple measures.

Idea is to avert windfall

The much-discussed individual mandate — the ACA’s requirement that millions of healthy young people buy coverage — will mean more money flowing into insurance-industry coffers. Some will be spent caring for people with expensive pre-existing conditions, of course. Franken’s provision is designed to keep any dollars left over from becoming an inadvertent windfall for an industry that, in many markets, needs to slim down.

The medical loss ratio, or MLR, is insurance-speak for the portion of every dollar an insurance company pays out — or “loses” — in claims. Historically, the term has been used within insurance companies that are, say, formulating targets for profitability.

Franken’s provision is based on a Minnesota statute that turned the MLR into a tool for guaranteeing the lion’s share of each premium dollar is spent on patient care and not on things like administration, CEO compensation and marketing.

In 1993, the Minnesota Legislature enacted minimum thresholds for insurers doing business here; they must spend a minimum of 65 percent of premiums on patient care for individual policyholders and 75 percent for those in the small-group market. Both ratios increased by 1 percentage point each year until 2000, when they hit 82 percent in the small-group market and 72 percent in the individual market.

Today, MLRs in Minnesota average 91 percent, in part because so many insurers in this market are nonprofits.

Originally a stand-alone bill

Franken’s federal legislation, which was introduced in 2009 as a stand-alone bill but was eventually incorporated into the ACA, requires individual and small-group policies to meet an MLR of 80 percent while large-group policies must hit 85 percent.

The measure went into effect Jan. 1, 2011, with the first ripples felt in other states. In some places, premiums fell 10 percent right away. In most places, insurers immediately began assessing everything from their own data-processing methods to brokers’ fees, according to Congress’ investigative agency, the General Accounting Office.  

States that felt that immediate implementation of the MLR would wreak havoc on consumers — say, by forcing one of only two companies in their marketplace providing individual coverage to stop issuing the policies — could ask for waivers that would allow them to scaffold up to the 80/20 rate much  in the way Minnesota insurers did in the ‘90s. The few that did must now meet the ultimate ratio.

Insurers’ first full, yearlong reporting period ended June 1. Companies that owe rebates will be required to issue them Aug. 1.

Some rebates will be indirect

Policyholders who bought individual coverage can expect to get their rebates directly, while those whose coverage was purchased by an employer may instead see the amount applied to next year’s premiums or in a few other narrowly defined ways used to hold down their health-care costs.

Regardless what type of policy they have, individual consumers will receive letters from their insurers explaining their MLR status and, if they are owed a rebate and it is going to their employer, how the process of using it to the policyholder’s benefit will work.

In Minnesota, no small-group rebates will be issued. Almost 93,000 policyholders with large-group coverage will receive checks averaging $197 per family, while 30,000 individuals who bought their own coverage will get an average of $38 per family.

HealthPartners will return $6.8 million to consumers and employers, according to the state Department of Commerce. (More detailed records can be found on the department’s website.)

Connecticut General Life Insurance Co. will rebate $1.7 million, American Family Mutual Insurance Co. $200,000, PreferredOne Insurance Co. $149,000 and Time Insurance Co. $140,000.

Average amount: $160

Checks will average $160, according to the U.S. Department of Health and Human Services, which has broken down the rebates by state and by type of policy.

According to the department, states with average rebates above $500 per family include Georgia at $811, Vermont with $807, Ohio at $783, Oregon at $777, Mississippi with $651, New York with $632, Alaska at $622, Alabama at $582, Illinois at $551 and Indiana with $503.

Ideally, there will be no future rounds of checks because insurers who do not meet the MLR threshold have an incentive to either lower premiums or provide more generous coverage.

Indeed, a study released in April by the health-policy think tank the Commonwealth Fund suggests that the rebates would have been even higher if they had been based on premiums charged in 2010, before insurers began adjusting in anticipation of the MLR provision.

“Nationally, con­sumers would have received almost $2 billion of rebates if the new MLR rules had been in effect in 2010,” the group reported. “Almost $1 billion would be in the individual market, where rebates would go to 5.3 million people nationally. Another $1 billion would go to policies covering about 10 million people in the small- and large-group markets.”

According to Commonwealth’s calculations, rebates owed in Minnesota would have been substantially the same.

“Implementation of the medical loss ratio provision is a huge step toward ensuring consumers’ premium dollars go to actual health care, not insurance company coffers,” Franken said in a statement issued as the MLR rule went into effect. “Many health insurers spend as little as 65 percent of your premiums on care, and the rest goes to enormous CEO salaries, advertising, or wasteful administrative costs. These regulations will hold health insurers accountable and make sure consumers get more value for their money.”

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Comments (23)

  1. Submitted by Steven Bailey on 07/09/2012 - 09:34 am.

    Bad Math

    The math in this piece doesn’t work.123,000 Minnesotans sharing $9 million is not $160 and $1.1 billion shared by 13 million is only $85. The fact is that these rebates are insignificant to the cost of Healthcare.

    • Submitted by Thomas Swift on 07/09/2012 - 10:15 am.

      ObamaCare math: Coming to a public school near you!

      ObamaCare math says that even though >40% of the people in this country pay $0 in income taxes, *everyone* is going to march out and buy health care insurance.

      It’s the same math that says that even though Medicare already puts >60% of the actual costs of service on increased insurance premiums for the middle-class worker, cutting $500 BILLION out of that program won’t be any problem.

      • Submitted by Bill DeCoursey on 07/09/2012 - 05:02 pm.

        Statistics out of context is not good math

        When my 4 children were young, we established savings account for them. Because they had over one dollar in investment income, they needed to file 1040s. The income they earned did not meet the threshold of tax liability. Does that mean that 80 percent of my household were freloading on the one taxpayer or is that just a meaningless statistic pulled out of context to make a point that really means nothing?

    • Submitted by Rachel Kahler on 07/09/2012 - 01:55 pm.

      Per family

      The rebate is $73 per person in Minnesota. At just over 2 eligible individuals per family, average, $160 makes sense. $1.1 billion shared by 13 million people is “only” $85, but in a family, that adds up. Just because you find that $85 is not a lot, doesn’t mean that everyone finds it insignificant.

  2. Submitted by mark wallek on 07/09/2012 - 10:44 am.

    Time to party

    I suppose one could celebrate the good fortune of these 123.000 minnesotans, but for the fact that this is a drop in the bucket of the profits generated by our capital centered “healthcare” system. It’s just a “token” meant for a bit of good press when in fact there is no good press to be had about our current, CEO enriching system. By turning healthcare, and education into for profit industries we have demeaned those these industries supposedly serve while actually providing a lower standard. A higher standard is avaliable to those with sufficient capital, and thus we have the reestablishing of an income based aristocracy we supposedly rejected with our war for independence. Our full circle has become a noose for the middle class, with the hangmen being our own elected “representatives” and the industries they serve..

    • Submitted by Dennis Tester on 07/09/2012 - 12:03 pm.

      Huh?

      “thus we have the reestablishing of an income based aristocracy we supposedly rejected with our war for independence. ”

      If by “income-based aristocracy” you mean that people with more money can afford to pay for more or better things, I’d suggest that wasn’t rejected when we won our independence from the king. We actually gained that right.

      It’s called living in a free society. Where people with greater talent or greater skills can sell that labor to the highest bidder and thereby achieve a level of comfort above and beyond those who can’t.

      There’s nothing sadder than people who fear and resent their own freedom.

      • Submitted by Ray Schoch on 07/09/2012 - 03:44 pm.

        Huh? Indeed…

        “…There’s nothing sadder than people who fear and resent their own freedom.”

        Actually, there is.

        Even more sad is rhetoric that defends, or even celebrates, the inherent limitation of freedom that accompanies the presence of an aristocracy – a limitation that affects all except members of that aristocracy and, perhaps, its sycophants.

        If “…living in a free society…” actually meant “…people with greater talent or greater skills can sell that labor to the highest bidder and thereby achieve a level of comfort above and beyond those who can’t…” we’d have something close to a utopia, and we demonstrably do not. Plenty of people with “greater talent or greater skills” lack the opportunity or connections or credentials, despite their talent and skills, to acquire for themselves that higher material standard of living, or the corner office they should have instead of their boss. Several recent books have researched this issue and concluded that economic mobility is significantly greater in other parts of the world than in the United States, and not all of those societies are ones that either I or Mr. Tester would call “free.”

        Beyond that, however, if we take Mr. Tester’s argument at face value, then what he presents above is a rationale for income-based health care. We already ration health care to some degree on this basis – neither Mr. Tester nor I will get the same degree of care for whatever ails us that members of the one percent take for granted – but Mr. Tester’s statement takes that notion one step farther and makes it explicit. If you’re wealthy, you get the best, and if you’re poor, well, you just die sooner, and from injuries or disease that the wealthy can pay to have treated, but the poor and – especially – the middle class, cannot. One hopes the bodies of the unfortunate aren’t cluttering the sidewalks of the Tester neighborhood in years to come if that philosophy is put into regular practice.

      • Submitted by Ginny Martin on 07/09/2012 - 05:14 pm.

        resenting their own freedom

        Do you mean they have the freedom to go without health care insurance, just the same as the wealthy? Do you mean they have the same freedom to live under a bridge as any rich person? Or maybe to find a shelter for the night, just like any rich person?
        When you say people of greater talent and skills, do you mean the kind of talent involved in the LIBOR fraud perpetrated by the wealthy to make MORE money–not just a living wage? Or the kind of scandal involved in Jamie Dimon’s loss of billions (I’ve lost track of how many billions). Or perhaps the entire housing bubble scandal, brought about by wealthy banksters and financiers?
        What about the talent and skills of a person born into the middle class but without the means to get a higher education unless he/she goes into debt by $20 -$50,000 or more? Or about the talents, intelligence, and skills of a member of the lower class, who has almost no chance of breaking out of poverty –and thus dooming their children and their children’s children — to a similar life?
        What sort of talent and skills would you recommend for the man or woman who has almost no material wealth (blacks have an average of about $10,000 in total wealth) who wants to get out of poverty?
        You are living in a fantasy world concocted by repub leaders who are being led around by their corporate bosses. This is a fairy store.

  3. Submitted by Ray Schoch on 07/09/2012 - 11:01 am.

    Math is math

    As is often the case, Mr. Swift has erected a very fine straw man which he proceeds to knock down. Bravo! Yes, it’s true that significant numbers of Americans pay no federal income tax. That’s because most of those people don’t have a high enough income to merit the paying of income taxes.

    For figures somewhat less removed from reality, go to:

    http://www.cbpp.org/cms/index.cfm?fa=view&id=3505

    The several bullet points there explain most of what Mr. Swift conveniently leaves out of his argument, not least of which is that the country remains in an economic recession brought about by massive fraud in the financial sector, for which the major players have yet to even have their knuckles rapped, much less be punished. It’s difficult to purchase health insurance if you’re out of work and have no income. Beyond that, however, there are some salient points at the above website:

    “These figures [the percentage who “pay no income tax”] cover only the federal income tax and ignore the substantial amounts of other federal taxes — especially the payroll tax — that many of these households pay.  As a result, these figures greatly overstate the share of households that do not pay federal taxes.  Tax Policy Center data show that only about 17 percent of households did not pay any federal income tax or payroll tax in 2009, despite the high unemployment and temporary tax cuts that marked that year.[5]  In 2007, a more typical year, the figure was 14 percent.  This percentage would be even lower if it reflected other federal taxes that households pay, including excise taxes on gasoline and other items.”

    “Most of the people who pay neither federal income tax nor payroll taxes are low-income people who are elderly, unable to work due to a serious disability, or students, most of whom subsequently become taxpayers.  (In years like the last few, this group also includes a significant number of people who have been unemployed the entire year and cannot find work.)”

    A relevant question would seem to be, “What’s the right wing / Republican alternative to the Affordable Care Act?” Most of us already know that those who can’t afford to buy health insurance will be subsidized by the rest of us through small business tax credits and other mechanisms. If Mr. Swift objects to that, what does he propose to put in its place as an alternative, and how will that alternative hold down the cost of health care?

    That health care in the U.S. has been corporatized, and transformed from a public service into a for-profit industrial monster of huge proportions, is morally untenable, certainly by anyone who claims to profess any of the major religions. Only in the U.S. can illness produce bankruptcy, and only in the U.S. does health care eat up such a large portion of GDP – a portion that is both growing and thoroughly unsustainable in coming decades. Every other industrial society on the planet provides health care to all its citizens, and while I’d prefer a national, single-payer system that’s basically an extension and expansion of Medicare, some of those other industrial societies use other means, including a certain amount of privatization, to reach the goal of covering everybody.

    The philosophical objections (and the mathematical ones, as well) to the Affordable Care Act are sophistry, largely motivated by selfishness. Neither is admirable.

    • Submitted by Thomas Swift on 07/09/2012 - 03:03 pm.

      That fat clue is close you can almost taste it, Ray!

      “Yes, it’s true that significant numbers of Americans pay no federal income tax. That’s because most of those people don’t have a high enough income to merit the paying of income taxes.”

      But they’re all gonna rush right out and buy them some ObamaCare. Enough, in fact, that people who already paid into Medicare won’t notice the $500 billion being cut out of it.

  4. Submitted by Rich Crose on 07/09/2012 - 11:42 am.

    This is a Boon for Wall Street

    Most people wont see a thing. The rebate goes to your employer who can do whatever they want with it. Your employer can use the rebate to reduce the price of your insurance or they can give it back to shareholders. It will be interesting to see how many companies just use it to show they reduced expenses and give it back to Wall Street in the form of dividends.

  5. Submitted by Beth Hawkins on 07/09/2012 - 02:15 pm.

    We’ve rechecked our math

    And stand by it. The $160 figure is the average rebate per policyholder. Some of those policyholders are heads of household. As members of those households, 123,000 Minnesotans will benefit.

    And while these numbers may seem trivial compared to the overall cost of healthcare, it’s worth noting again that MLRs are much more consumer-friendly in Minnesota than the rest of the country because of the 1993 statute. Premiums are falling by much larger increments in other states.

    • Submitted by Thomas Swift on 07/09/2012 - 02:22 pm.

      “As members of those households, 123,000 Minnesotans will benefit.”

      See also: ObamaCare math; extrapolation for re-election.

    • Submitted by Steven Bailey on 07/09/2012 - 05:55 pm.

      I don’t understand your math

      I don’t want to get in an argument but could you please explain how you could have rechecked it. Your article states that 123,000 Minnesotans will share rebates of $9 million. It does not say 123,000 heads of household or 123,000 families, which still doesn’t matter. If you have $9 million divided by 123,000 it is $73.17 no matter how you spin it. That is the math. If the average rebate is $160 per policyholder then only 56,250 policy holding Minnesotans will share in the $9 million rebate. To also put this in context there are over 5 million people in MN.

      I voted for both President Obama and Senator Al Franken and I will vote for Senator Franken again.

      • Submitted by Rachel Kahler on 07/10/2012 - 08:59 am.

        Household

        Read more carefully. The $160 is per HOUSEHOLD. It didn’t say “per policy holder,” no matter how you spin it.

  6. Submitted by Beth Hawkins on 07/09/2012 - 02:36 pm.

    Rich;

    The law gives employers very little latitude on how they can spend employees’ rebates. They cannot send the money to shareholders. They can use it to offset next year’s premiums.

    • Submitted by Rich Crose on 07/10/2012 - 11:04 am.

      Thank you for the clarification

      I’m waiting for the letter from my health plan to wave in front of the Board of Directors.

  7. Submitted by Ginny Martin on 07/09/2012 - 04:48 pm.

    buying Affordable Health Care

    Yes, of course they are going to buy health care under the new Patient Protection Act. They have to and they should. Many who did not buy before are the young and healthy who decide to gamble on their good health and many lost. Many of them did not because they did not have the money, but this protection act allows them to buy health insurance at reasonable cost and subsidized if they do not have the money.
    What is the problem?

    • Submitted by T J Simplot on 07/09/2012 - 07:08 pm.

      Two problems.1. The penalty

      Two problems.

      1. The penalty for not buying insurance is so low that it will still make financial to wait to buy insurance when you need it.

      2. The ACA has taken all most of the power from the IRS to actually go after the penalty. The only legal way for them to get the penalty is to deduct it from any tax refund due to a person. If they don’t get a refund, there is no way for the IRS to collect.

      • Submitted by Ginny Martin on 07/09/2012 - 09:35 pm.

        IRS

        I think you mean that affordable health care reform means that all IRS agents will have to be used to find those who did not buy health care and that other tax dodgers will be left alone. Taxpayers will check off a box on their tax return and the processes will go on from there. IRS agents won’t be knocking on your door and combing the neighborhoods. They’ll do just what they’re doing now, and adding one more job that cannot possibly take the entire IRS staff. Ever made a mistake on your taxes and paid too little–or somehow failed to file one year or were late one year? Did you get a bevy of IRS agents at your door? Of course not. The IRS has various means of collecting that do not include breaking your knees.

        What are people so afraid of? I don’t get it.

        • Submitted by T J Simplot on 07/10/2012 - 07:39 am.

          Be careful what you wish for

          Here is what I am afraid of.

          Not only is the penalty for not having no insurance very low, the chances of it being enforced are also very low. This means that healthy people will have no real incentive to buy insurance until they need it as there really is little or no risk in doing so. Imagine how much your car insurance would be if people only bought it when they had an accident? If I had my way I remove the monetary penalty and replace it with an eligibility penalty. Set a target date (i.e. 1/1/14) and if people are signed up by that date there is no penalty and no-preexisting condition clause. If they are not signed up by that date, they can’t sign up again for another year and when they do sign up, anything pre-existing is not covered.

          I’m also afraid that people just don’t understand how much removing the pre-exisiting condition clause is going to affect rates. You can expect at least at 50% increase in individual plan rates with the pre-existing condition clause rate removed. Here in Minnesota (which by the way, according to the Star Tribune was just rated the #1 state for health care) we have MCHA which is a plan for people who have been denied coverage because of pre-ex so there are options for the uninsurable.

          • Submitted by Thomas Swift on 07/10/2012 - 10:17 am.

            So refreshing

            TJ, you cannot imagine how refreshing it is to see a MinnPost reader that not only “gets it”, but is willing to “say” it.

  8. Submitted by Ginny Martin on 07/09/2012 - 05:06 pm.

    buying Affordable Health Care

    Of course they are going to buy health insurance! That’s what they are supposed to — must — do. If they can’t afford it, they are given subsidies. If they have just been gambling on not getting sick, they will now buy health care. So what’s the gripe? It’s not as though they’re rushing out to buy a new Cadillac or put in a swimming pool. For many, they will no longer have to decide whether to buy food or medicine.

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