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The 80/20 Rule: Providing Value and Rebates to Millions of Consumers -

June 21, 2012: The new health reform law, the Affordable Care Act, holds health insurance companies accountable to consumers and ensures that American families are reimbursed if health insurance companies don’t meet a fair standard of value.

Because of the Affordable Care Act, insurance companies now must reveal how much of premium dollars they actually spend on health care and how much they spend on administration, such as salaries and marketing. This information was not shared with consumers in the past. Not only is this information made available to consumers for the first time, If an insurance company spends less than 80% of premiums on medical care and quality (or less than 85% in the large group market, which is generally insurance provided through large employers), it must rebate the portion of premium dollars that exceeded this limit.[1] This 80/20 rule is commonly known as the Medical Loss Ratio (MLR) rule.

On June 1, 2012, insurance companies nationwide submitted their annual MLR reports for coverage provided in 2011 to the Department of Health and Human Services (HHS). Based on this data, insurance companies that didn’t meet the 80/20 rule will provide nearly 12.8 million Americans with more than $1.1 billion in rebates this year. Americans receiving the rebate will benefit from an average rebate of $151 per household.

Under the new health care law, rebates must be paid by Aug. 1 each year. As a result, 12.8 million Americans will see one of the following:

• a rebate check in the mail

• a lump-sum reimbursement to the same account that was used to pay the premium if it was paid by credit card or debit card

• a direct reduction in their future premiums

• their employer providing one of the above rebate methods, or applying the rebate in a manner that benefits its employees.

Consumers in every state will also receive notifications from their insurance company about the 80/20 rule. Under the Affordable Care Act, insurance companies will send a letter to subscribers every year they miss the 80/20 mark. The letter will explain the purpose of the 80/20 rule, how far the insurance company fell short of this goal, and the percentage of premium it owes in rebates. In 2012, insurance companies that meet or exceed the standard in the 2011 coverage year will send a notice to consumers explaining the purpose of the 80/20 rule and notifying consumers that they met or exceeded the standard. Insurance companies will provide consumers with unprecedented information about the value consumers get for every dollar spent on premiums. All of this information will be publicly available on

The 80/20 rule is ensuring that insurance companies provide consumers value for their premium dollars. This rule works in combination with other consumer protections in the Affordable Care Act, like the program that reviews insurance companies’ rates to ensure that premium increases are not unreasonable. Insurance companies are now required to subject insurance premium rate increases of 10% or more to a new review process and justify these increases. Most states now have the authority to determine whether these increases are excessive, while HHS reviews rates in states that do not operate effective rate review programs. In making these determinations, HHS and the states closely review insurance companies’ 80/20 or MLR standards.

Summary of All Markets

Americans covered by insurance companies that failed to meet the MLR standard will receive an average rebate of $151 per family across all markets. The average rebate per family is expected to be $152 in the individual market, $174 in the small group market (which is generally insurance provided through small employers), and $135 in the large group market.. The states with average rebates above $500 per family are: Vermont ($807),Oregon ($777) and Indiana ($503) in the large group market; Georgia ($811), Ohio ($783), New York ($632), Alaska ($622), and Illinois ($551) in the small group market; and Mississippi ($651) and Alabama ($582) in the individual market.
Approximately 66.7 million consumers are insured by an insurance company that provides the required value for their premium dollars. This means that a large majority of consumers are insured by companies that meet or exceed the MLR standard: 62% of consumers in the individual market; 83% in the small group market; and 89% in the large group market.

Individual Market

In the individual market, companies that did not meet the standard will pay $394 million in rebates to an estimated 2.6 million households this year. The average rebate in the individual market is approximately $152 per family. Subscribers in Mississippi ($651), Alabama ($582), Maryland ($496), and Delaware ($461) are likely to see the highest rebates.

Small Group Market (Insurance Provided Through Small Employers)
Over 1.8 million families, which include 3.3 million consumers enrolled in those policies, will see an average rebate of $174 provided to their employers in the small group market. Insurance companies in the small group market will issue $321 million in rebates this year.

The average rebate per family will be more than $500 in Alaska ($622), Georgia ($811), Illinois ($551), New York ($632), and Ohio ($783).

Large Group Market (Insurance Provided Through Large Employers)
Insurance companies in the large group market are expected to return $386 million in rebates. Generally these rebates will be paid directly to the employers to be distributed to their employees according to employees’ contributions to premium, benefiting approximately 2.9 million families or 5.3 million Americans. Though fewer companies in the large group market owe rebates, at a national level these companies are providing roughly the same dollar amount in terms of total rebates. This is because a larger number of consumers benefit from rebates in the large group market when compared to the individual or small group markets.

States whose health insurers have the highest average rebate in the large group market are Vermont ($807), Oregon ($777), Indiana ($503), Colorado ($475), Maine ($463), and New Jersey ($359).


For years, Americans have watched their premiums rise faster than their wages. Although these increases are partly due to rising medical costs and utilization of services, they are exacerbated by rising insurance company administrative costs (including marketing and salaries of CEOs) and profits, which contribute little or nothing to the care of patients or the health of consumers.

Many Americans are working hard to ensure that their families have health insurance coverage, and they do not deserve to have their premium dollars wasted on excessive administrative costs and profits. The Affordable Care Act and the 80/20 rule guarantee this right for consumers, and the over $1.1 billion in rebates provided through this rule show that insurance companies can no longer pass excessive administrative costs and profits on to consumers.


Details of Exchange Begin to Emerge


Healthline, By David Gorn -

June 20, 2012: California Health Benefit Exchange Board members yesterday heard presentations on a number of topics including stakeholder opinions on qualified health plans, potential exchange users' opinions on what they need from the exchange and possibilities for creating call centers. All of those discussions seemed to lead to the same two things: cost and service.

"If we drop the ball on service, we will drop the ball on everything," said Peter Lee, executive director of the exchange board. "Service matters."

Lee was discussing the results of a discussion group of possible users of the exchange, who articulated what they would want in an exchange. He was also referring to a report submitted yesterday on defining the parameters for qualified health plans that will participate in the exchange.

In both cases, the bottom line was the same.

"Affordability is really important," said Andrea Rosen, staff counsel for the exchange. "That's not the first time you've heard that, and it's not the last time you've heard that."

Among stakeholders, there is broad support for standardization of plan offerings, Rosen said. Stakeholders recognize the challenges and tradeoffs that must be struck between improving quality and access, Rosen added.

"We asked how many plans should be offered, and we got consistent response that too many choices will create confusion and make clear communication difficult," Rosen said.

"Also, many people felt it would be good to reverse the dynamic of lower payments to primary care and higher payments to specialists," Rosen said, "and that will be tricky to address, but we will try to do that."

A similar overall message was voiced by Marjorie Ginsburg, executive director of the Center for Health Care Decisions, who presented the potential-user discussion group results, with an emphasis on opinions about cost-sharing.
The discussion groups were presented with three cost-sharing models, Ginsburg said, with varying deductibles, copays and annual maximums.

"Copayments were a major factor," Ginsburg said. "About 80% chose Plan B because it had the lowest copays. People were not as worried about the annual maximum." People had little understanding of co-insurance, she said.

In one of the discussion groups, not a single participant had ever had health insurance as an adult, and that raised a huge red flag, Ginsburg said.
"So the concepts and words [of health care insurance] are totally foreign to them," she said. "The whole discussion was very difficult."

The take-home message was summed up by board member Kim Belshé: "It's clear," she said, "we need to be applying the cost lens with every decision we make."


Insurers Say: With or Without You, PPACA


National Association of Health Underwriters -

June 11, 2012: No matter what happens with the Supreme Court ruling, the nation’s largest single private insurer, United Health Group, announced it will keep offering some of the law’s most popular insurance market reforms to its customers. Aetna and Humana both made a similar announcements.

Effective today, all United, Aetna and Humana policies will include provisions related to coverage of preventive health care services, coverage of dependents up to age 26, lifetime policy limits, rescissions and appeals.

No matter what happens with health reform at the federal level, the company says these benefits will remain available to current and future customers and members. The company is not establishing any sunset provisions.

In order to maintain market stability, United also announced its intent to work with other private insurers to ensure that children ages 19 and under will all still have access to coverage without preexisting condition limitations. However, CIGNA has already announced that it will not make any changes to its benefit plan offerings until after the Supreme Court rules on PPACA later this month.

In NAHU’s view, it’s unsurprising that the private market plans to continue to accommodate the popular portions of the law on a voluntary basis. That’s the power of a free market at work. What’s more concerning to us are the parts of the law that have already been implemented and over which the private market has no control. For example, the federal Preexisting Condition Insurance Program is currently serving about 56,000 Americans. Should the law be struck down, many of those individuals will be able to get coverage through state high-risk pool programs, albeit at a much more expensive rate. However, in a number of states, there are no high-risk pools to turn to, so medically uninsurable people cannot buy private coverage in the individual market at any price. Which means thousands of very sick individuals may well become the collateral damage of a political decision to pass a law that may be at least partly unconstitutional without including a severability clause.


California Health Care Legislation Update





Here’s a quick summary of some of the key health care bills, all of which have passed out of the first house as of Friday 6/1 and will be heard in the health committee in the second house:

* SB961 (Hernandez) “reforms” the individual health insurance market, pursuant to the Affordable Care Act.

* SB970 (De Leon) facilitates the "no wrong door" to eligibility and enrollment for health and social services programs. This was one of the only bills that passed with bipartisan support.

* SB1410 (Hernandez) makes changes to the independent medical review process to provide more disclosure.

* AB1800 (Ma), sponsored by Health Access and the MS Society, limits out of pocket costs for consumers. This bill has been significantly amended; earlier versions imposed more regulation on pharmacy benefits.

* AB1461 (Monning), similar to SB 961, deals with individual market rules.

* AB1526 (Monning) expands eligibility for the state's high risk insurance pool to make its requirements similar to the federal high risk pool, PCIP.

* AB1636 (Monning) creates a process to review and evaluate the effectiveness of wellness incentive programs.

* AB1846 (Gordon) requires the licensing and regulation of Co-Op health plans under Knox-Keene.

* AB2350 (Monning) requires more reporting by plans on products sold in the California market.

* AB1553 (Monning) codifies the medical exemption process for individuals in Medi-Cal managed care.

* AB2266 (Mitchell) creates a medical home program for individuals who frequently use emergency room services.

* AB 2392 (Perez) directs the Department of Health Care Services to seek federal funding for interpretation services for Medi-Cal recipients.

* AB2508 ((Bonilla) requires call center services to be performed by California workers. This bill was “fixed” to exempt health care service plans.

To view text of any Bill, click on this link:


Even with a High Court win, Obamacare won't work





Forbes, By Shawn Tully -

May 22, 2012: A new study shows that the basic requirements of President Obama's health care plan have been tried, and failed, in many states in the past two decades.

The Obama administration maintains that its Affordable Care Act is a complex construct that's endangered if the Supreme Court finds its central feature -- the requirement that all Americans buy health insurance -- unconstitutional.
It's certainly true that eliminating the "individual mandate" will immediately expose the plan as unworkable. It can only succeed by creating a broad, universal insurance pool that collects big premiums from the young and healthy. If the young and healthy aren't required to sign on, they won't.
Hence, the pools won't be remotely large enough to pay for the older, sicker folks who get the best deal, and are bound to flock to the state exchanges.

In reality, the reform plan's success doesn't depend on the Supreme Court's decision at all. Its faulty design virtually guarantees that all the things the administration warns will happen if it loses will happen anyway. Even if it stands, the legislation will spawn insurance plans crowded with high-cost folks, driving premiums higher, hobbling competition as carriers abandon the exchanges, and leaving tens of millions of Americans uninsured.

Here's the reason the Affordable Care Act's future is predictable: Its basic requirements have been tried, and failed, in many states in the past two decades. A new study, prepared by Milliman, Inc. for AHIP, the group representing America's healthcare insurers, examines the experience of eight states, including Kentucky, Maine and Washington, that adopted the two basic pillars of the Obama plan in the 1990s.

Those two measures are Guaranteed Issue, and Community Rating. The former requires that insurance companies accept all patients regardless of their medical condition, at any time they want to sign up. Community Rating dictates that insurers cannot charge different premiums based on health status, and face limits on how much they can vary premiums according to a person's age.

All eight states encountered similar problems. People who'd been previously uninsured bought coverage as soon as they suffered a heart attack or contracted diabetes. Pregnant women entered the plans, then dropped out after giving birth. Premiums for young, healthy people soared. Typically, a 60-year old's medical care runs about six times that of someone in their twenties. But in New York, insurers must charge exactly the same premiums for both. For many years, Maine limited the difference to just 20%.

So the young Americans needed to make the plans work mostly dropped out. Instead of shrinking the ranks of the uninsured -- the goal touted by the states -- their numbers often increased, rising 30% in Washington from 1993 to 2000. Premiums jumped as the insurance pools became dominated by older, sicker patients. From 1996 to 2002, for example, premiums in the individual market rose 44% in Maine. Carriers fled. By 2000, 31 out of 39 counties in Washington didn't have a single insurer offering coverage to people not covered by their employer or a federal plan.

By the early 2000s, most states either abandoned or radically changed the two provisions that caused the damage. Kentucky and New Hampshire repealed both guaranteed issue and community rating. Washington substantially loosened its provisions. New Jersey and Maine both expanded the range insurers could charge for patients of different ages, with Maine going from a limit of 20% to a band that expands to five-to-one by 2015. South Dakota and Iowa repealed guaranteed issue in 2004 and 2003 respectively.

The Affordable Care Act is embracing the provisions that many states tried, and then rushed to escape. It imposes guaranteed issue, so that patients with any pre-existing condition must be granted coverage any time they apply. It also limits differences in premiums according to age to a three-to-one range. That would force insurers to raise premiums for 20-year olds by at least 50%, and lower them for 60-year olds to far below their actual costs, forcing the young and healthy to subsidize older, sicker Americans.

That goal may sound laudable, but it won't work. The Affordable Care Act professes to ensure that all Americans buy insurance, but undermines its own goals by setting penalties so low that the young and healthy, and many middle-aged and healthy, will not buy coverage. The penalties start at 2014 at either $95 a year, or 1% of income, whichever is higher. They reach a maximum of 2.5% of income in 2016. Those small penalties may be irrelevant anyway. The measure also provides that anyone who can't find a policy priced at 8.5% of their income or less is exempted from buying insurance.

The plan's champions argue that it will work where the state plans didn't because of the big subsidies it provides. But that's not what the math shows. Take a 30-year old, single person earning $50,000. He or she would get no subsidy under the Obama plan. A policy would cost our candidate, say, $10,000 a year, far more than that person is paying now--again, courtesy of community rating. The penalty for foregoing coverage is just $1250 a year in 2016.

But remember, if the policy costs over 8.5% of income, you can drop your insurance and pay no penalty, and the $10,000 more than qualifies. So our healthy 30-year old is making a rational economic choice by going uninsured. In fact, he or she is really "insured" after all since a non-payer can sign up for coverage, no questions asked, any time they get sick.

It may be true that the Obama plan would work if it pulled all Americans into the insurance pools, even though that would force the young to pay more than their costs. But it doesn't come close. The Supreme Court drama is a distraction from the real issue: A "reform" plan that the experience of the states, and its own jerry-rigged system of penalties and subsidies, guarantee will fail.


Health insurers owe rebates to many California policyholders





Los Angeles Times, By Chad Terhune -

June 2, 2012: Anthem Blue Cross, Blue Shield of California and Kaiser Permanente are to distribute more than $50 million in rebates across some 1 million California customers.

Anthem Blue Cross owes some California policyholders nearly $40 million in rebates and nonprofit rival Blue Shield of California owes about $11 million under a requirement of the federal healthcare law.

Nationwide, insurers had to notify federal and state officials by Friday of how much they owe customers if the companies failed to spend a minimum amount of customers' premiums on medical care last year. Insurers must pay these rebates by Aug. 1.

The $51 million in rebates disclosed Friday by two of the state's biggest insurers will be shared among nearly 1 million customers statewide. Nonprofit Kaiser Permanente reported that it owes $280,000 statewide.

Not all of an insurer's policyholders will get rebates, and the amounts will vary widely.

Lawmakers and consumer advocates pushed for the rebates as part of the 2010 Affordable Care Act to ensure that companies aren't raising rates to pay more for executive salaries, shareholder dividends and other expenses unrelated to customers' care. They also hoped these rules would hold down future rate increases and force insurers to squeeze out excess costs.

"This requirement has been very successful so far," said Timothy Stoltzfus Jost, a law professor and health policy expert at Washington and Lee University. "Premiums are starting to come down a little bit because insurers are realizing if premiums run ahead of medical costs they have to give the money back. Health plans are having to become more efficient."

Under the federal law and similar state rules, insurers must spend at least 80% of premiums on medical care when dealing with individual and small-group policies, which cover businesses with 50 or fewer workers. When dealing with larger employers, insurers must spend at least 85% of premiums on medical expenses. Employers that self-insure are not subject to these requirements, which are referred to as a medical loss ratio.

Anthem Blue Cross, the second-biggest insurer in California with about 3.6 million customers, said it owes rebates to 38,175 small businesses totaling $38.6 million. That's because the unit of WellPoint Inc. spent 77.5% of premiums on their medical care, below the 80% requirement. Those small employers cover 323,585 employees and family members.

The small-business average rebate per person is $119, to be split between the employer and the worker. Companies are expected to share the rebate money based on the percentage workers contribute to their annual premiums.

Anthem said it owed an additional $1.3 million in rebates across 407,429 individual customers, or about $3 per person on average. "Predicting the cost of care is an inexact science because there are many variables, which can cause actual costs to be higher or lower than expected," said Darrel Ng, a spokesman for Anthem Blue Cross.

Blue Shield, the state's third-largest health insurer with 3.3 million members, said it owed $10.8 million in rebates to 260,671 customers who purchased individual and family policies. That's because it spent 78.2% of premiums on their medical care last year, short of the 80% requirement. The rebates are expected to be about $42 per person on average.

The San Francisco company said it did not owe rebates to small and large employers last year.

Kaiser, the state's largest nonprofit health insurer with about 6.6 million customers, said it owes about $280,000 to 21,800 individual customers, or about $13 per person on average.

Its medical spending for those plans was 79.6% last year, falling just short of the government requirement.

Earlier this week, UnitedHealth Group Inc. disclosed that it owed $3.5 million in rebates to nearly 4,400 small businesses in California. Health Net Inc. in Woodland Hills said it didn't owe any rebates to its 1.1 million customers in the state.

Even with the new rules on rebates, state insurance officials are still pushing for a proposed ballot measure that would give state regulators authority to deny rate increases. More than 30 other states already have that regulatory power.

"The medical loss ratio, while important, doesn't prevent excessive rate increases," said Janice Rocco, California's deputy insurance commissioner for health policy. "Companies can still have administrative expenses approaching 20%."

Consumer Watchdog, a Santa Monica advocacy group, turned in 800,000 signatures last month to qualify the ballot initiative for the Nov. 6 election. County election officials are verifying the signatures.

Insurers, as well as hospital and physician groups, oppose the ballot measure on the grounds that it would create a costly new bureaucracy and put too much power into the hands of an elected insurance commissioner.

Patrick Johnston, president and chief executive of the California Assn. of Health Plans, said "further political price control is counterproductive."


UnitedHealth to rebate $3.5 million to California small businesses





Los Angeles Times, By Chad Terhune -

May 31, 2012: The insurance giant is the first insurer to say how much money it will return because its spending on medical care fell short of requirements under the federal healthcare law.

Nearly 4,400 small businesses in California will share in $3.5 million in rebates from insurance giant UnitedHealth Group Inc. this summer as insurers nationwide prepare to return millions of dollars to customers as a key benefit of the federal healthcare law kicks in.

The first of these California rebates, amounting to about $98 each for nearly 36,000 small-business employees and dependents covered by UnitedHealth, comes because the company's spending on medical care fell short of new government requirements.

Insurers must notify federal and state officials of how much they may owe policyholders by Friday if they failed to spend a minimum amount of customers' premiums on medical care last year. Consumer groups pushed for this provision in President Obama's Affordable Care Act to ensure that companies aren't raising premiums to pay for executive salaries, shareholder dividends and other expenses unrelated to customers' care.

Healthcare experts say the rebates probably will be modest on a per-person basis and most of the money may go to employers. As of Wednesday, UnitedHealth was the only insurer that had filed rebate information with the state Department of Managed Health Care. Other companies are expected to disclose the size of their customer rebates later this week and send out money by Aug. 1.

UnitedHealth, the nation's largest insurer, said checks will go out in July to those small businesses affected. The Minnetonka, Minn., company said that under the federal rules it did not owe rebates to individual policyholders or large employers in California.

Gerald Kominski, director of the UCLA Center for Health Policy Research, said these rebates are an important milestone since most other provisions of the federal law don't take effect until 2014, and policyholders have continued to face rising premiums. The average premium for employer coverage in California has increased 154% over the last decade, more than five times the 29% increase in the state's overall inflation rate.

"For the first time, a broad spectrum of California and America will feel a positive consequence of this legislation," Kominski said."When is the last time you got a rebate from your health insurance company? People have been waiting a long time for this."

California insurance officials said it's too early to estimate the overall amount of rebates statewide. Janice Rocco, the deputy insurance commissioner for health policy, said regulators will begin auditing insurers' information on expenses and profits next month to ensure that their rebate calculations are accurate.

However, the future of these rebates and the entire federal healthcare overhaul is uncertain as the U.S. Supreme Court considers the constitutionality of the law. A court ruling is expected next month.

California lawmakers passed a similar state requirement on medical spending, and state regulators have said those rules would stand even if the federal law is overturned. But insurers don't necessarily agree with that view.

Excluding California, insurers are expected to pay an estimated $1.3 billion in rebates to U.S. consumers and employers this year, according to a study last month from the Kaiser Family Foundation. The nonprofit group said the average rebate for individuals was an estimated $127 per person.

Under the federal and state laws, insurers must spend at least 80% of premiums collected on medical care for individual and small-group policies, which cover businesses with 50 or fewer workers. For larger employers, insurers must spend at least 85% of premiums on medical expenses. Employers that self-insure are not subject to these requirements, which are referred to as a medical-loss ratio.

In its state filing, UnitedHealth said it owed rebates because its medical-loss ratio for small businesses was 77.9% last year, short of the 80% threshold. UnitedHealth said its loss ratio on individual customers was 80.1% and 88.6% on larger companies, meeting the government requirements.

Cheryl Randolph, a spokeswoman for UnitedHealth, said 35,922 workers and their dependents are covered by the small-business rebates, but it's up to employers to decide how they share those savings under the federal law. Some employers may split the rebate money based on the percentage workers contribute to their annual premiums or they could reduce next year's premium by a similar amount. Not all small-business customers of UnitedHealth qualified for the rebate.

"We think our numbers reflect that we are pretty close to pricing in line with what we are seeing on the medical cost trend," Randolph said.

Rebates will vary for each company and kinds of policies. A spokesman for Health Net Inc. in Woodland Hills said its medical spending met the minimum requirements and that it doesn't expect to issue any rebates to its 1.1 million customers in California.

Patrick Johnston, president and chief executive of the California Assn. of Health Plans, said insurers are committed to issuing rebates, when necessary, but the rules don't address the larger issue of rising medical costs.

"Rebates are one way to adjust the price of insurance," Johnston said, "but the bigger issues are containing cost and extending coverage."



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