Texas Insurers Could Send Out $160 Million In Rebates Next Year — Maybe
By Carrie Feibel, KUHF
Dec 23, 2011 - Kaiser Health News
Starting in 2012, health insurance plans in Texas -- and most of the
rest of the country -- may have to cough up millions of dollars in rebates
to customers. The rebates will come from health plans that spend too much on
administrative costs instead of medical care. The change is part of the national
health overhaul law, the Affordable Care Act.
But state officials in Texas and 16 other states have asked to push back the
requirement for a few years.
Bob Vesey is a small business owner who could benefit from the rebates. Vesey
is the owner of Packtech, a foam fabrication company that he started in 2003 in
Grand Prairie, Texas, a town near Dallas.
Packtech has only three employees, and Vesey and his wife have to buy their
own health insurance on the individual market. Right now the couple pays $764 a
month to Blue Cross Blue Shield, and the premium keeps going up every year,
sometimes twice a year.
"Right now I get these letters. I cringe every time I get an envelope from
BCBS," Vesey says. "I say 'Oh, here's another one.' You just don't even want to
get that mail. You just donft want to receive it."
Vesey has his eye on the insurance rebate provision of the Affordable Care
Act called the medical loss ratio, or MLR.
In a nutshell, the MLR requires insurance companies to spend at least 80
percent of what they take in, on actual medical care. The other 20 percent can
go to overhead and profit.
"That's reasonable in the mind of any Texan I've ever met," says Blake
Hutson, an advocate with Consumers Union in Austin. "And that 20 percent, you can go
keep spending 20 percent on your administrative overhead, which is things like
lobbying or paying CEO salaries. They can still spend money on those things, but
theyfve just got to give us a baseline."
Insurance companies who now exceed the 20 percent will have to rebate an
estimated $160 million next year to Texans who buy insurance on their own.
Vesey says he'd welcome that: "That'd be wonderful. At least you'd know."
But the Texas Department of
Insurance has asked the federal government for a delay. Under that plan,
insurance companies would have three years to reach that 80 percent.
The state told the federal Department of Health and Human Services that the
phase-in of the rebate program is necessary to prevent smaller companies from
leaving Texas or going out of business.
The Texas Department of Insurance declined to comment for this story.
Robert Zirkelbach is a spokesman for America's Health Insurance Plans, the national lobbying group
for insurance companies. He says that the new regulation tries to make insurers
responsible for rising premiums, when really the problem lies with doctors,
hospitals, and drug and device companies.
"The biggest issue is it doesnft get at the soaring cost of medical care,"
Zirkelbach says. "And instead it imposes a new arbitrary cap on health plan
administrative costs. Some plans may have no choice but to exit the market
altogether, and people could lose the coverage they have today."
More than 30 companies offer individual insurance in Texas. In contrast,
Maine, the first state to win approval for its application to waive the
requirement, has only three companies in its insurance market.
Consumer advocates say that even if a few Texas companies do drop coverage,
itfll be less a threat and more like good riddance.
Take, for example, Standard Life
and Casualty Insurance. That company spends only 53 percent of premiums on
medical care, with the rest going to overhead and profit, according to the state
documents filed with the feds.
"Which I think would surprise some Texas consumers that we have some plans
out there that offer that little value," says Stacey Pogue of the Center for Public Policy Priorities in
Austin. "The new rules that are put out would end business as usual for
these types of low-value health plans and that benefits all
consumers."
Standard Life and Casualty did not respond to requests for comment.
For their part, Texas' Democratic representatives in Congress have sided with
the consumer advocates, encouraging
HHS to turn down the Texas request for a delay.
Austin Rep. Lloyd Doggett, who chairs the Texas Democratic delegation,
disparaged the statefs move as "nothing more than an early Christmas gift
from Governor Perryfs allies to insurance companies."
The feds will probably rule on the Texas request sometime in January. Of the
17 states that have applied to change the rebate rules, six have been denied,
five were approved with modifications, and five are still under review,
according to documents from the Centers for Medicare and Medicaid. Only Maine
got full approval for its request.
© 2011 Henry J. Kaiser Family Foundation. All rights
reserved.