Health insurers push back on consumer rebate letter

Kaiser Health NewsMarch 29, 2012 

WASHINGTON — Thanks to hefty profits and a requirement in the health law that takes effect this year, insurers will send subscribers hundreds of millions of dollars in rebate checks this August. But the industry and the Obama administration are at odds over proposed language in a letter that's to go out with the checks, as well as who's to be notified.

The administration may require insurers to send notices about rebate rules even to customers who aren't getting rebates. America's Health Insurance Plans, an industry lobby, called that "unnecessary and illogical."

It also objects to a proposed message for rebate recipients that mentions the health law in the second sentence, describing the message's language as "inflexible and highly prescriptive."

"This letter is to inform you that you will receive a refund of a portion of your health insurance premiums," the letter begins. "This refund is required by the Affordable Care Act — the health reform law."

Republicans say the proposal would force industry to pay for what amounts to Democratic campaign literature weeks before November's elections.

"The fact that many individuals receiving this advertisement won't even be affected by this policy shows it to be merely propaganda," Rep. Joe Pitts, R-Pa., said in an interview. Pitts is the chairman of the Health Subcommittee on the House Energy and Commerce Committee.

The 2010 health law requires insurers to make partial refunds to subscribers or employers if the companies don't spend a certain portion of the premiums they charge — 80 to 85 percent in most cases — on medical care. The measure was intended to boost spending on treatment and reduce insurers' administrative costs and profits.

Because of a moderation in 2011 health-care spending and outsize industry profits, analysts expect this year's rebates to be substantial.

Up to 9 million Americans could get checks totaling up to $1.4 billion, Steve Larsen, the director of the Center for Consumer Information and Insurance Oversight at the Health and Human Services Department, told Congress on March 21. Rebates in the individual-policy market could average $164 apiece, he said.

If rebates had been required in 2010, 53 percent of individual subscribers, 23 percent of small-group subscribers and 15 percent of large-group subscribers would have gotten checks, according to an analysis by the National Association of Insurance Commissioners. Most of the money — $978 million — would have gone to the individual subscribers, the study found.

The Department of Health and Human Services has received several comments on the proposed notices, but it hasn't set the final language or determined whether those who aren't getting rebates should get notices about insurers' "medical loss ratio." That's the portion of premium revenue that's spent on health care and quality improvement.

Notifying non-recipients as well as recipients would take up to 100 million more letters, according to America’s Health Insurance Plans. The added cost for the industry would be $200 million to $300 million, Daniel Durham, the group’s executive vice president for policy, said in a letter to HHS. The agency estimates that the additional cost would be far less: $71 million.

"There is no requirement in the law that issuers not paying a rebate provide any notice," a comment letter from Cigna lawyer Edward P. Potanka said.

Said Pitts: "The real irony lies in the fact that the purported purpose of this provision is to remove excessive administrative costs, but this mandate will actually impose a major administrative cost and burden to comply."

Advocacy groups that are promoting the law's benefits, on the other hand, argue that consumers should receive notices whether they're getting rebates or not, to increase public awareness of how insurers use their resources.

"It is ... critical that consumers have the information necessary to understand, evaluate and compare health plan MLRs," Ethan Rome, the executive director of Health Care for America Now, a pro-health law group, said in a comment letter, referring to medical loss ratios.

In any case, Rome added, government should supervise the letters' language closely. Otherwise, he said, insurers could take credit for the rebate largesse.

"The reason the industry doesn't like it is they don't get to claim it's their idea," he said through a spokeswoman. "They just want to put their name on it."

HHS says it's close to finalizing the rules.

(Kaiser Health News is an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health policy research and communication organization that isn't affiliated with Kaiser Permanente.)

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