In a press release issued today, Aetna announced the results of their Medical Loss Ratio calculation. The Medical Loss Ratio Provision, alternately called the Karl Marx Dictate, is imbedded in a federal law (PPACA) requiring health insurance companies to kick back “excessive” profits to the masses.
AETNA PRESS RELEASE:
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+ total employees); Small Group (less than 100 total 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.
So where will customers receive rebates? We’ve gathered Aetna’s information here for you. You can see the pools that will receive rebates. The rebate amount will vary by policyholder.
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 the 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. A Commonwealth 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.