Michelle Hicks

Idaho individual and small group health plans could be eligible to receive nearly $3 million in rebates from health insurers. As a part of the 2010 Patient Protection and Affordable Care Act, commonly known as health care reform, insurers are required to spend a certain percentage of collected premiums on costs related to health care. Those percentages are called the Medical Loss Ratio (MLR) standard and are set at 85 percent for the large group market and 80 percent for the small and individual market. Employers who self-insure are not affected.

In Idaho, Kaiser state health facts reports the large group market was not eligible for any rebates, but the small group market is estimated to receive $2,651,078 and the individual group $261,374. Nationally, Kaiser estimates the payouts to be around $1.3 billion. Insurers must pay the rebates by Aug. 1, but it is not clear how they will be distributed to actual participants.

The rebates are supposed to be paid to whoever paid the premium – easy enough to distinguish on an individual plan, but much more complicated for an employer-sponsored group health plan, when premium costs are shared by employees. Rules issued allow employers to possibly provide premium holidays, or reinvest the rebate into more benefits. In some instances, the actual rebate for individuals would only be pennies.

When the rebates were made part of the Affordable Care Act, they were designed to ensure insurance companies were actually spending premiums on health care instead of administrative costs, like executive salaries. It was viewed as an opportunity to curb rising premiums by asking insurers to put more skin in the game around rising health care costs. Some insurance experts say that approach is working.

Kaiser President and CEO Drew Altman told Employee Benefit Adviser, “The study shows that asking insurance companies to put more of their premium dollar toward patient care rather than administration and profits is not only popular but also effective.”

And Timothy Stoltzfus Jost, a law profession and health policy expert at Washington and Lee University, told the L.A. Times, “Premiums are starting to come down a little bit. … Health plans are having to become more efficient.”

That’s good news for insurance buyers, be they individuals or plan sponsors. Still, the latter has only a couple months left to consider how to distribute a rebate should it arrive this summer.

Warns Rich Stover, a principal with Buck Consultants, said “In July or August you will get a check and you need to start thinking now, ‘What process do I have in place?’” So, while it sounds like a great problem to have more than $2.6 million to distribute or allocate, now is the time to for Idaho’s fully insured employers to carefully think it through.

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Michelle Hicks, a senior professional in human resources, is a director in the communication practice of Buck Consultants, a Xerox company.