Column: Don’t erase health care rebates
In the past year, Congress and state governments put forward dozens of proposals and changes to the way health care works in the U.S., from efforts to repeal and replace Obamacare to rolling out a welcome mat for states to radically alter their Medicaid coverage to the detriment of beneficiaries.
Premiums and out-of-pocket costs continued to rise. For example, one insurance company decided to retroactively deny emergency department visits for the people they cover if their symptoms end up being diagnosed as a “non-emergency.” Unfortunately, 2018 isn’t shaping up to be any better for consumers.
One major change being considered would erase the hundreds of millions of dollars in rebates that insurers pay out each year to their customers. In 2016, more than $34 million of these rebates went back into the pockets of Michiganders.
The potential change hinges on what is known as the 80/20 Medical Loss Ratio. This provision provides a major benefit to health care consumers in Michigan and across the United States. The 80/20 Medical Loss Ratio provision requires that insurers in the individual market re-invest at least 80 percent of premium dollars they get from the people they insure into providing health care services and improving the quality of health care delivery. The remaining 20 percent is what the insurers can keep to spend on administrative costs and retain as profits.
Today, if insurers spend less than 80 percent of the premiums they received on providing medical care, they must rebate the difference to their customers. Unfortunately, the Trump administration and the Centers for Medicare & Medicaid Services (CMS) want to virtually eliminate the 80/20 Medical Loss Ratio requirement, allowing insurers to pocket the money they would otherwise pay for consumer health care services, improving care quality, or as rebates to consumers. After being tucked into a 365-page proposed rule known as the 2019 Notice of Benefits and Payment Parameters that is slated to be finalized any day, this provision that has allowed billions in rebates to be paid to consumers since 2011 will quietly slip away.
Lest you worry, the insurers are doing just fine. Although these profits are capped within the 20 percent ratio, insurers report hundreds of millions of dollars in earnings each quarter. Last summer, all six of the top insurers’ stocks hit an all-time high. And insurers are expected to reap billions more as a result of the new tax reform law, with analysts estimating it will boost insurance companies’ profits by as much as 15 percent.
At the end of January, another insurance giant, Aetna, projected that the recently adopted tax bill will increase the company’s gross 2018 adjusted earnings by about $800 million. By virtually eliminating the 80/20 Medical Loss Ratio, these new profits won’t have to be reinvested in quality care or refunded to consumers.
Some may think these massive new profit gains will trickle down to consumers in other ways. But if the history of rising health care costs and rising insurance profits tells us anything, our guess is they will not. By doing away with a strict 80/20 requirement, we can only imagine where that will leave health care consumers in Michigan and across the country.
Jason Resendez serves on the board of Consumers for Quality Care.