If a key provision of the new health care reform law had been in effect last year, Hoosiers buying individual health insurance would have been refunded $30 million.
Indiana Insurance Commissioner Stephen Robertson worried that amount of revenue loss could chase insurers from the Indiana market, leaving consumers fewer options. So he asked for a waiver that would delay implementation of the new rule. The U.S. Department of Health and Human Services is considering Indiana’s request.
The estimated refund amounts were calculated for Robertson’s agency this month, based on health insurers' most recent annual filings, to see how close insurers were to meeting new guidelines that require them to spend at least 80 percent of premium revenue on medical bills.
Only 19 of the 63 companies writing individual health insurance policies in Indiana have been meeting the 80-percent standard. The other 44 companies in the state would have to give rebate checks to their consumers to make up the difference between what they actually spent on medical care and the 80-percent threshold.
Those 44 companies cover 94 percent of the nearly 200,000 Hoosiers covered by individual health insurance.
The state’s behemoth, Indianapolis-based Anthem Blue Cross and Blue Shield, is fairly close to the mark, spending 76.6 percent of premiums on medical bills. At that rate, it would have to refund a total of $9.3 million to the nearly 115,000 people it covers under individual policies. Those refunds would amount to about $81.50 per person.
Indianapolis-based Golden Rule Insurance Co. would have to pay back $4.6 million to its customers, an average of $255 per person insured. Golden Rule, a subsidiary of Minnesota-based United Health Group, currently spends about 64 percent of premiums on medical bills.
One company already exceeding the 80-percent rule is American Family Mutual Insurance Co. It spends 83.4 percent of premiums on medical care, and so would pay no rebate.
Even though the medical-loss threshold took effect in January, rebates will not be paid out until next year based on 2011 data. But if the health insurers' spending rates remain steady throughout this year, total rebates would equal nearly 7 percent of the $423 million in annual premiums insurers have been charging. To avoid paying rebates, insurers must reduce their prices or enrich their benefits.
Robertson clearly does not like the new law, called the Patient Protection and Affordable Care Act. He worries that some insurance carriers will stop competing in Indiana.
“Like the rest of Gov. Daniels’ administration, our agency continues to fully support the lawsuit filed by Attorney General Greg Zoeller on behalf of our state that challenges ACA’s constitutionality, but if it remains the law of the land, I must do everything in my power to protect Hoosiers and the health insurance market from its unintended consequences,” Robertson said in a statement.
He said nearly 10 percent of insurers offering individual policies in Indiana already have decided to leave the state.
So Robertson wants HHS to phase in the 80-percent rule, beginning at 65 percent this year and not rising to 80 percent until 2015. In addition, he wants the 80-percent rule waived for new market entrants until 2015.
Robertson also wants consumer deductible health plans, such as health savings accounts, to be exempt from the 80-percent rule indefinitely.