Nearly 20,000 Aetna customers in Maine will soon receive rebates on their health insurance premiums because a provision in the Affordable Care Act limits what insurance companies can spend on administrative costs.
The rebates for 2013 service, totaling more than $1.8 million, will be issued by Aug. 1. Most will be in the form of temporary reductions to their premiums, although some customers might receive checks. The average payment will be $149 for thousands of the insurer’s Maine customers who have employer-based plans. All insurance companies selling individual plans complied with the rule and no rebates will be issued.
Called the “medical loss ratio” rule, it caps administrative spending at 20 percent of premium dollars for individual or small group plans, and at 15 percent for large group plans, typically offered through companies with more than 50 employees. The remainder must go toward paying for patient care. The law is meant to protect consumers by ensuring that extra profits made by insurance companies, often due to a company paying out less in claims than anticipated, would be rebated to customers and not used for CEO bonuses or other administrative costs.
“It’s a safety net,” said Mitchell Stein, a health policy analyst who lives in Cumberland. “What it does is it says to insurance companies, ‘You all need to be on a level playing field’ for the consumers. When you’re paying your premium, you want to make sure what you’re paying for goes to actual medical costs. You don’t want your CEO to be making as much as Warren Buffett.”
According to the U.S. Department of Health and Human Services, more insurance companies are complying with the medical loss ratio rule than when the provision first went into effect in 2011. Nevertheless, $330 million is being rebated across the United States.
In Maine, the total rebate amount is up from last year, when about $500,000 was returned to customers for 2012 service. In the prior year, for 2011 service, the total was $2.5 million.
Doug Dunbar, spokesman for the Maine Bureau of Insurance, said calculating how much will be paid out in claims is an inexact science.
“Companies make actuarial projections to meet the standards, but the actual experience may differ from projections,” Dunbar wrote in an email response to questions. Dunbar said customers are much more likely to receive a premium adjustment rather than a check from their insurance company to cover the rebate.
Stein said the closer the rebates are to zero, the better, because it means people were not overcharged throughout the year.
The fact that no rebates had to be issued for individual plans in 2013 bodes well for Maine’s health insurance marketplace, he said. Created by the Affordable Care Act as a place where people could shop for subsidized individual insurance, the marketplace started offering plans for this year. So any rebates on those plans would be distributed in 2015.
Kevin Lewis, executive director of Maine Community Health Options, one of three insurers operating in Maine’s marketplace, wrote in an email that he expects the company, which began selling in the marketplace in 2013, will meet the standard. About 80 percent of Maine’s marketplace consumers chose a Maine Community Health Options plan for 2014.
“We’ll have to see how everything unfolds over the next few months, but we certainly project that our (medical loss ratio) will fall within the allowable range, which is a significant accomplishment for a brand new company,” he wrote.
Joe Lawlor can be contacted at 791-6376 or at: