On April 26, the Kaiser Family Foundation released a report estimating the impact the Patient Protection and Affordable Care Act’s (PPACA) medical loss ratio (MLR) provisions will have on health insurance consumers this year in the form of premium rebate checks that are supposed to be mailed to health insurance consumers this coming August. While the total amount of all projected rebates at first seems to be large—$1.3 billion—when you read the fine print of the report, it becomes clear that these rebates aren’t quite the windfall that some people have been predicting. Furthermore, the coverage disruptions, loss of agent services, and higher overall premiums caused by both the MLR requirements specifically and PPACA generally, negate any consumer benefit the rebates may provide.
The highest rebates are estimated to be paid in the individual market, where the best guess is that 31% of insurance consumers nationally will be getting a yearly rebate of about $127 per person. In the small group market, about 28% of groups will be eligible for a rebate, with the average amount going to employers expected to be $21 per enrollee. In the large group market, 17% of fully-insured large groups are sharing an estimate of $541 million in rebates. That translates to an average of $14 per enrollee over a year’s time. Given that the average cost of employer-provided family health insurance is now about $13,000 per year, it’s doubtful that many people will find $14 to be a real savings.
That’s also assuming that any of the group insurance beneficiaries even see the money directly. Kaiser based its estimates on preliminary data that health insurance carriers provided to their state department of insurance and the National Association of Insurance Commissioners on April 1. Actual rebate amounts, which will be reported to HHS by the heath insurance carriers using a slightly different form, have not yet been calculated and could vary. In addition, individuals and employers may receive a future premium credit from the insurance carrier, rather than an actual rebate check. Also, very significantly for most employer groups, the MLR rules allow employers to keep the portion of the rebate directly attributable to their employer contribution and use the remainder of the funds to benefit the employer plan generally. So most employees won’t see any direct rebate cash, but hey, who cares about lowering health insurance premiums anyway?