One of the tangible byproducts of the Affordable Care Act has been arriving in the mailboxes of a few million Americans over the past few weeks. Rebate checks, which average $151, are due to be delivered to approximately 12.8 million people by Wednesday.
The rebates are the result of a provision in the law that requires health insurers spend at least 80 percent of their premium dollars on medical costs for those enrolled in individual and small-group plans (the standard is 85 percent for large group.) If they don't, they must pay a rebate to the policyholder.
While there was a lot of gnashing of teeth over the so-called medical loss ratio provision when the ACA was first passed in 2010, the actual delivery of the dollars seems to be arriving with little pain and agony by the health plans, but plenty of opportunities for P.R. by the federal government and the health plans. See what we did for all you consumers!!
In announcing the rebate checks recently, the Department of Health and Human Services said the highest rebates were being paid in five states Mississippi, Alabama, Maryland, Delaware and West Virginia. In those states, the rebate checks averaged as high as $651 in Mississippi and as low as $383 in West Virginia.
It's easy to see a pattern among these states. For one thing, Blue Cross and Blue Shield plans are very much in charge of their markets and they command huge advantages over their competitors. In Alabama, Blue Cross and Blue Shield holds 74 percent of the overall commercial market and an even higher amount of the small-group and individual sectors that are affected by the rebates the most. A lack of competition likely shaped the benefit design that led to the rebates. Carriers had little incentive to offer generous benefits if a competitor wasn't going to be beat them on price and value.
The rebates also reflect the growing acceptance of high-deductible health plans, which require much more spending by consumers and less by health plans or the employers that finance the designs. High-deductible designs have forced consumers to spend as much as $5,000 out of pocket in some cases before their insurance coverage kicks in. They've been particularly prominent in the South and in low-income states where the rebate checks are the highest.
Now that the first round of rebates is behind the plans, they'll likely employ other strategies to spend more on patient care in the future. Already we're seeing plans announce initiatives to pay more for physician services, hire more coordinators for patient care and invest in technology to improve outcomes. All of those will help next year's MLR.
The new benefits exchanges may change the competitive landscape in some of the states that received the highest rebates. Until then, patient care may continue to be skimpy.
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