Aetna announced June 6th, 2012, that it will pay health insurance rebates in 17 states plus the District of Columbia. The rebates are a result of the Medical Loss Ratio (MLR) provision in the Affordable Care Act. Aetna stated that, “In this first year of the MLR requirements, Aetna’s rebates represent about 0.5 percent of the premiums we collected.”
The MLR provision states that a health insurance company must spend between 80% – 85% of its premium revenue on health care services and health care quality improvement. If they don’t meet the stated percentages, they must rebate the difference back to the policy holders.
Premiums reflect cost of care
As Aetna noted in their press release, the small rebate they are paying in a number of the insurance pools illustrates their ability to accurately predict medical cost trends and price their plans accordingly. However, they were just as quick to note that accurately predicting their premium rates does nothing to hold down the escalating price of medicare services provided by doctors or hospitals.
Obesity driving healthcare costs
As if to point a finger at the American consumer Aetna mentioned, “And at least a third of the American population is obese, a condition that drives up health spending.” In other words, health insurance would be a lot cheaper if America was a lot skinnier. With the revelation that obesity is driving health insurance premium skyward, I fully anticipate Aetna will begin advocating for a fast food and snack tax to help trim our waist lines. At the very least, I would hope Aetna would become a major proponent of First Lady Michelle Obama’s healthy foods campaign.
Full press release from Aetna
Aetna’s Medical Loss Ratio (MLR) Filings Demonstrate Appropriate Pricing
Aetna Advantage Plans for Individuals, Families and the Self-Employed and AARP® Essential Premier Health Insurance, insured by Aetna
The Medical Loss Ratio (MLR) provision of the Affordable Care Act set minimum percentages that health plans must spend on medical costs and quality improvement. On June 1, 2012, insurers filed reports with the federal government detailing where they met the minimum, where they didn’t, and how much they will pay their insured customers in rebates.
We’re pleased with Aetna’s results. Our goal is to price our business so that we deliver the greatest value to our customers, remain competitive in the market and grow our business. The reports we filed with the U.S. Department of Health and Human Services (HHS) demonstrate our ability to price appropriately, even in a year marked by a bad economy and industry-wide, lower than-expected utilization of medical services.
In this first year of the MLR requirements, Aetna’s rebates represent about 0.5 percent of the premiums we collected. The rebates we are paying are modest, and most policyholders won’t receive a rebate at all.
Where is Aetna paying rebates?
MLRs are calculated for each pool set up by the government. A pool is defined by:
- The size of the group – Large Group (generally 100+ employees); Small Group (less than 100 employees) or Individual
- The state where the plan’s contract is written
- Legal entity (for example, Aetna’s HMO and PPO plans are in different legal entities)
Aetna has plans in more than 200 rebate pools nationwide, and we met the MLR requirements in all but 28 of them.
What happens next?
By August 1, Aetna is scheduled to send notices to all subscribers and policyholders of plans due a rebate. In most cases, policyholders (plan sponsors) will receive the plan’s rebate. In certain circumstances, the government has directed that the rebate go directly to subscribers of policyholders (e.g., terminated plans where we cannot locate the policyholders). The amount of the check will depend on the total premiums paid by the customer in 2011. We’ll also include a summary of the government’s guidelines on how group policyholders may use the rebate money.
Does this mean the Minimum MLR provisions are working?
The Minimum MLR rules demonstrate an insurer’s ability to accurately predict medical cost trend and price according to it. However, they do nothing to address rising medical costs. ACommonwealth Fund study that came out just a few weeks ago found that America’s high health care price tag is primarily due to high prices for medication and medical services, as well as a good deal of use of expensive technology. And at least a third of the American population is obese, a condition that drives up health spending.
At the same time, the Institute of Medicine has estimated that waste and inefficiency in health care cost some $750 billion a year.
These are the issues primarily driving the cost of health care premiums. Aetna is focused on addressing them through innovative programs and methods, health information technology, and consumer engagement. We are concerned that the Minimum MLR rules will limit our ability to invest in these initiatives. The rules also unnecessarily increase administrative costs for us and our customers, and could even force insurers out of some markets, reducing competition and limiting choice.
However, we are committed to complying with the law. We are pleased with our ability to price appropriately in this first year of the law, and expect to continue improving our pricing so we can continue to grow our business and avoid future rebates. Our goal is to provide our customers with competitive pricing that reflects medical costs in their markets.