One APA formula – the Medical Loss Ratio – limits private insurance carrier overhead and profits to 20% of premium income, with 80% to be dedicated to health care claims and quality improvements. 2
As described in the Henry J Kaiser Family Foundation report entitled “Data Note: 2019 Medical Loss Ratio Rebates”:
The Medical Loss Ratio provision requires insurance companies that cover individuals and small businesses to spend at least 80% of their premium income on health care claims and quality improvement, leaving the remaining 20% for administration, marketing, and profit. The MLR threshold is higher for large group insured plans, which must spend at least 85% of premium dollars on health care and quality improvement. Insurers failing to meet the applicable MLR standard have been required to pay rebates to consumers since 2012 (based on their 2011 experience). Currently, MLR rebates are based on a 3-year average, meaning that 2019 rebates are calculated using insurers’ financial data in 2016, 2017, and 2018.
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The Orlando Sentinel, in a September 13, 2019 story entitled “Florida insurers must refund $107 million to customers” explained the Medical Loss Ratio refund impact to Floridians:
The premiums that some private insurers charged over the past three years were too high, so now they will have to return some of that money — a total of $1.3 billion — to their customers, according to a new analysis by the Kaiser Family Foundation.
Florida insurers, including health and life insurance companies, are paying $107 million in rebates. Almost $21 million of the total is being refunded to individuals and the rest to employers that have small and large group plans. 3
The per-consumer rebates may not be especially large. As further reported in the Orlando Sentinel:
Most of the refunds in Florida are paid out by the state’s largest insurance company, GuideWell, the parent company of Florida Blue and Health Options.
The company is refunding almost $90 million, $14.6 million of which is going to people with Florida Blue individual plans.
“We began processing checks for distribution in early August. The average amount per recipient is $33,” said Christie Hyde DeNave, a spokeswoman for Florida Blue, referring to rebates to individuals. 4
Other insurers issuing rebates in Florida — to individuals and employers — include United States Life Insurance Company in the City of New York, Connecticut General Life Insurance Company, Aetna Life Insurance Company, Aetna Health Inc Florida, Reliance Standard Life Insurance Company and UnitedHealthCare, according to the Kaiser Family Foundation.
Insurers can issue the rebates in the form of a check to consumers or as a credit applied to the premiums. For people with employer coverage, the rebate may be shared between the employer and employee, according to the analysis. 5 (Underlining added.)
There are limits to the rebates. “If the amount of the rebate is exceptionally small (“de minimis”, $5 for individual rebates and $20 for group rebates), insurers are not required to process the rebate, as it may not warrant the administrative burden required to do so.” 6
One APA formula – the Medical Loss Ratio – limits private insurance carrier overhead and profits to 20% of premium income, with 80% to be dedicated to health care claims and quality improvements.
Rebates are to start by the end of September, and are expected to continue the following year. 7
As a result, Florida’s individuals and small businesses should pay attention to pending rebates, and ask questions if they have policy-specific questions.
2 https://www.kff.org/private-insurance/issue-brief/medical-loss-ratio-rebates/. Original source: https://www.floridatrend.com/article/27827/fridays-daily-pulse#link2
3 For an interactive map and charts showing APA refund details by state see https://www.kff.org/private-insurance/issue-brief/medical-loss-ratio-rebates/.
6 Ibid. 2.
7 Ibid. 4.
– For more information, call Philip N. Kabler of the Gainesville, FL office of Bogin, Munns & Munns at 352.332.7688, where he practices in the areas of business, banking, real estate, and equine law. He has taught business and real estate law courses at the University of Florida Levin College of Law and Warrington College of Business Administration. And is now the President-Elect of the Eighth Judicial Circuit Bar Association.
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