If you are a resident of Massachusetts, and you have health insurance coverage, you might be getting an insurance rebate soon! This is thanks to the Affordable Care Act that requires health insurance companies to spend at least 80% of the money they get from premiums on actual health care for their customers. Insurers who failed to do that have to send out rebates.
The medical loss ratio, or MLR, is a regulation that is part of the Affordable Care Act. It went into effect in 2011. The purpose of the law was to prevent insurance companies from spending the majority of the money that they got from their customer’s premium payments on things like employee salaries, advertisements, and other administrative costs.
The medical loss ratio requires health insurance companies to spend at least 80% of the money that comes from premiums on things that a reasonable person would assume could improve the health of their customers. This would include things like medical bills from hospitals and doctors, mammograms, smoking cessation programs, and much more. Insurers have to use the other 20% of their profits to pay for things like a bonus for their CEO, or for computer upgrades, for example.
This is the first year since the medical loss ratio went into affect that insurers are having to face the consequences of failing to live up to the requirements of the MLR. They have to send out rebates to their customers now. It has already happened in Tennessee, and now, residents of Massachusetts are about to receive insurance rebates.
There will be about 164,000 people who are residents of Massachusetts who will be receiving a rebate on their health insurance premiums soon. This averages out to around $140 per family. These rebates are expected to be distributed by August 1, 2012. The insurance companies who failed to meet the medical loss ratio have to disclose exactly why they went over the 20% limit on non-medical spending. They are being held accountable.
There are some other important things to know about insurance rebates. If your health insurance plan comes from your employer, then your employer might be receiving the rebate instead of you. Or, you might get a pro-rated amount in your rebate, instead.
Employers are allowed to use the rebate amount to improve the health plan that they offer to workers. One example of how they can do that is to take the rebate money and reduce the amount that each worker pays for his health insurance premium by a few dollars.
On the other hand, if your health insurance policy is an individual plan, that is not connected to your employer, then you will likely be seeing a rebate soon. It could come in the form of a check, or as a credit that can be used on future health insurance premium payments. Or, it could be an amount sent to the credit card that you use to pay for your health insurance.
Image by Norman B. Leventhal Map Center at the BPL on Flickr