Under both Massachusetts law and the ACA, insurers must spend a minimum percentage of health care premium revenue on medical benefits for the people they cover. This is called the “Medical Loss Ratio” (MLR) in insurance argot. If insurers don’t spend enough of their revenue on medical care, and too much on administrative and other costs, they must pay a rebate of the excess to their customers. The Massachusetts requirement for last year was that at least 90% of all premiums for individuals and small groups must go for medical care, and no more than 10% can be used for administrative, marketing, profit or other non-medical costs. This is in addition to the federal ACA requirement that large group plans devote 85% of their revenue to medical care.
In Massachusetts, four insurers are returning a total of $57.5 million to customers this summer because of this provision.
Our national partner, Community Catalyst’s Health Policy Hub blog recently spoke with Liz McCarthy of Waltham about the $749 rebate she received from her insurer. We reprint their interview with permission:
Community Catalyst: I heard you recently received a check in the mail from your insurance company. How much was it for? How did it make you feel when you opened the envelope?
Liz: The check was for $749.00. I felt very excited! I think this was the first time I’ve gotten money back from the insurance company, which was great. It was a very gratifying experience, a great example to share. I posted it on my Facebook page – I have some friends who are anti-ACA, and told my dad who is not so on board with Obamacare. It is great to have a concrete example rather than just seeing things in the press. This is me, I got the money — and yay!
Community Catalyst: Were you expecting the check?
Liz: We’d been informed by my employer that we would be getting a rebate because of the ACA, and President Obama and his wonderful planning, but I was surprised at how much it was. But because I work for a small employer, fewer than 20 employees, 90 percent [of premiums] now have to [go to] medical care and 10 percent to administration. We didn’t use as much in medical care as we paid, so we got it back.
Community Catalyst: Who is your insurer, where are they based?
Liz: Tufts HMO, an in-state insurance company.
Community Catalyst: What kind of information did your insurance company include with the check to explain why you were receiving it?
Liz: I got the check from my employer, but the insurance company sent out a letter last week outlining the ACA and why we had received the funds. The language was pretty formal, “because of the ACA, we are required to keep our administrative costs at 10 percent for companies with fewer than ‘x’ employees.” It included only what the law required and why they were doing it.
Community Catalyst: The ACA requires insurance companies to spend consumer money responsibly or return it to consumers. As a customer, does this affect your perception of your insurance company?
Liz: It makes me feel good that they are following the law, which of course they have to do. I just feel that they are doing the right thing – communicating with customers, being responsible, and implementing the Affordable Care Act. So yes, it made me feel better about them, and about the value of care I am paying for through my premiums.
Community Catalyst: Do you link the checks with changes mandated by Obamacare?
Liz: Yes. Our employer and insurance company provided information about the rebate and its relation to Obamacare.
Community Catalyst: What does this check mean to you personally, or to your family?
Liz: My husband and I, and our two little boys , are going to take a long weekend at a resort in Maine in August. The kids are very excited. We decided between resorts in New Hampshire and Maine, they were very involved in the decision.
Community Catalyst: Next year, if your insurance company complies by federal rules, you will not receive a check. However, your savings will be reflected in lower premiums. How do you feel about this?
Liz: Well it’s sort of the same thing as when you get an income tax refund. It is always exciting to get that big refund, but what that means is that you weren’t able to do a very good job budgeting your money throughout the year. I would much rather have the lower premiums and be able better to spend or invest my funds than to get a rebate at the end of the year. It’s not like I would ever argue with a $700 check , but I would hope that it doesn’t occur and that it would be a smaller amount next July. With MLR rebates, this is real earned money and it is from the insurance company by virtue of them needing to work smarter and better to decrease the overall cost of health care, which is obviously a national travesty as we spend way more for our care than any other country but rank poorly on quality of care.
– Sarah Gordon, Community Catalyst