Rebate payment prediction: $2 billion

Consumers nationwide would have received an estimated $2 billion in rebates from health insurers if the new medical loss ratio (MLR) rules enacted as part of the Patient Protection and Affordable Care Act (PPACA) had been in effect in 2010, according to a new study from The Commonwealth Fund.

Almost $1 billion in rebates would have been issued to about 5.3 million people who receive coverage through the individual market, or 53% of all those with individual coverage nationwide, if the MLR rule had been in effect in 2010. Another $1 billion would have gone to about 10 million people with policies in the small- and large-group markets. About one-quarter (23%) of privately insured consumers in all markets would have received rebates.

In the report, “Estimating the Impact of the Medical Loss Ratio Rule: A State-by-State Analysis,” Mark Hall of Wake Forest University and Michael McCue of Virginia Commonwealth University estimate how much consumers in each state would have received in total rebates, and the number of insurers that would have been required to give rebates if the rule had applied in 2010.

People with private insurance in Texas would have received the most, with $255 million in rebates owed by 22 insurers, going to 39% of policy holders. Florida consumers would have received the second highest amount, with total rebates of $202 million owed by 11 insurers going to nearly half (47%) of those with private coverage. Individual rebates would likely have ranged from $100 to $300. Virginia ($128 million), Illinois ($112 million), and Maryland ($109 million) round out the top five.

The estimates offer a prediction of what insurers may expect to see in August of this year when they are required to issue rebates to 2011 policy holders if the insurers do not meet the new MLR thresholds, which took effect January 1, 2011.

For-profit insurance companies are more likely to fall below the MLR limits and owe rebates to their customers than non- profit insurers, according to the estimates. Provider-sponsored health plans are substantially less likely than other insurers to owe rebates. Provider-sponsored insurers may be more inclined to favor provider incentives over corporate profits.

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