This year, many Americans are going to be getting a rebate from their health insurance companies. It will come from the insurers who failed to meet the requirements of the medical loss ratio. This is the first time since that law was passed that rebates will be issued. Will your insurance company be sending you a rebate?
The medical loss ration, or MLR, went into affect in 2011. This is a health insurance reform law that is designed to help consumers, (not health insurance companies). The MLR was created in order to prevent insurance companies from spending the majority of the money that their customers paid for their premiums on things like employee salaries, advertisement, and other administrative costs.
Have you ever been denied coverage for a medical bill that you expected your insurer to pay for? How would you feel if you learned that your insurer was spending most of your premium on new computers for their offices, or a great big bonus for their CEO? Personally, I would feel as though the insurer was cheating me out of the service they were expected to provide when I bought the policy. This sums up the need for the MLR.
The medical loss ratio requires health insurance companies to spend at least 80% of the money that they get from premiums on activities that will improve the health of their customers. This includes things like medical bills that health providers send to the insurance company, coverage of smoking cessation programs, and other things that a logical person would reasonably assume would result in an improvement in a person’s health. Insurers of large groups have to spend at least 85% of the money they get from premiums on the same sorts of things.
The remaining 20% is what insurers can use for profit, and to cover administrative costs. This part would include things like employee salaries, (including salaries paid to executives), rent, replacement of office equipment, advertisement, and whatever other administrative costs the insurance company has.
Health insurance companies that failed to meet the 80/20 standard in 2011 are now going to have to pay their customers a rebate. This includes customers who purchases an individual insurance plan as well as customers who pay for an employer sponsored health insurance plan. Those insurers have to send out the rebates to their customers by no later than August of 2011. That deadline is for the first round of rebates.
Kathleen Sebelius, the Secretary of Health and Human Services, said that around $323 million in rebates is expected to be returned to consumers this year. This is the very first time that health insurance companies have been required to face the financial consequences of failing to comply with the medical loss ratio.
Are you getting one of these rebates? It could come in more than one form. Insurers can chose to send it in the form of a check. Wouldn’t it be nice to get a check from your errant insurance company in the mail, instead of a bill? Or, insurers can issue rebates in the from of a reduction in your health insurance premium. They also can send a lump-sum payment to the credit card that you have been using to pay for your health insurance premiums.
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