Health insurance rebates OK'd

Michigan consumers who buy individual health insurance could receive up to $89 million in rebates during the next three years as part of a federal health reform requirement.

Earlier this week, the U.S. government said it denied Michigan Insurance Commissioner R. Kevin Clinton's request to temporarily exempt insurers in Michigan from the requirement that insurers spend 80 percent of consumers' premium dollars on health care and no more than 20 percent on administrative costs.

Customers from insurers that don't meet the 80-20 rule will see rebates next August based on companies' data from this year, said Gary Cohen, acting director of oversight for the Center for Consumer Information and Insurance Oversight at the U.S. Department of Health and Human Services. The rebates will come in the form of a check or a credit toward their insurance premium, he said Monday during a call with reporters.

The state has 10 days to appeal and hasn't decided whether it will, said Jason Moon, a state insurance office spokesman.

"Our agency is disappointed with HHS's decision to not allow Michigan's health insurers time to adjust to higher federal medical loss ratio standards," Clinton said in a statement. "We're hopeful it doesn't result in increased costs and fewer consumer choices."

More than 340,000 people buy individual health insurance policies in the state, and eight firms are expected to pay rebates for 2011, according to the federal government.

Indianapolis-based Golden Rule Insurance Co., which in 2010 spent 61 percent of premiums on health care, may pay $10 million in rebates; Milwaukee-based Time Insurance Co., $5.3 million; Hartford, Conn.-based Aetna Inc., $1.7 million; and Louisville-based Humana Inc., $1.3 million, according to the Michigan Office of Insurance and Financial Regulation.

Other insurers expected to pay rebates are Alliance Health and Life Insurance Co., a subsidiary of Detroit-based Health Alliance Plan; Grand Rapids-based Priority Health; Milwaukee-based John Alden Life Insurance Co., and MEGA Life and Health Insurance Co. of North Richland Hills, Texas.

The state's largest insurer, Blue Cross Blue Shield of Michigan, won't pay any rebates since it spends 93 cents of every $1 in premiums on health care.

Michigan sought phased-in compliance with the mandate. The state requested that insurers be allowed to spend at least 65 percent of premiums on health care this year, 70 percent in 2012 and 75 percent in 2013.

Under the state's proposal, consumers were projected to have received $38 million in rebates, Cohen said.

The federal government has given waivers to some states if they show the rule will destabilize the individual insurance market. Cohen said it's not likely that will happen in Michigan.

Michigan has a "stable and relatively competitive market," he said, adding that he doesn't expect any insurers will withdraw from the state's individual market based on the federal government's decision.

But U.S. Rep. Mike Rogers, R-Brighton, said the decision will lead to job losses in Michigan.

Michigan Consumers for Healthcare, an advocacy organization that led a campaign against the state's waiver, called the decision a "defeat for the insurance lobby."

mburden@detnews.com

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