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Florida residents to miss out on health insurance rebates

Maryalene LaPonsie | November 24, 2010

Most people seem to agree that health insurance companies should not be profiting off others' misery. That's why one important component of health care reform was to limit health insurance rates charged to consumers. In 2011, insurers that spend too much on such administrative expenses as salaries and employee perks will be required to refund their customers. However, Floridians might not be so lucky.

Medical loss ratios and your health insurance rate

What's up for debate in Florida is something called a 'medical loss ratio.' Those three words have been generating a lot of debate across the nation in recent weeks. You see, the amount of money an insurance company actually spends on your care compared to the amount it collects in premiums determines the ratio.

In 2011, the federal government is mandating that health insurance companies spend at least 80 to 85 cents of every dollar you send them to pay for your health care. If they are not spending at least that much, you get a check for the difference. According to the Department of Health and Human Services, consumers who purchase individual health insurance plans can expect to receive refund checks averaging $164 next year.

Not so fast, say many health insurance companies, arguing that they can't possibly spend that much on patient care. Already, dozens of 'mini med' plans which offer low cost health insurance and minimal benefits have received waivers from the federal government. Now the entire state of Florida appears poised to do the same, according to a St. Petersburg Times report.

Florida Office of Insurance Regulation locks arms with the industry

Normally, state insurance offices are considered watchdogs for consumers. They review health insurance rate increase requests, mediate customer complaints and offer support services. So it is somewhat surprising that the Florida Office of Insurance Regulation has decided to side with health insurance companies when it comes to medical loss ratios.

In a written statement, the office cited concerns that enacting the new medical loss ratios in 2011 would 'disrupt' the health insurance market. The state is asking for a waiver until 2014 when the majority of the health care reform provisions, including Health Insurance Exchanges, go into effect. Currently, Florida regulations require medical loss ratios of 65-70 percent.

From an industry standpoint, enacting the new medical loss ratios in 2011 will cause a cash flow issue for businesses that have already set budgets for the fiscal year. For example, according to its 2009 financial figures, Golden Rule, a UnitedHealthcare subsidiary, would have to pony up $38.1 million to mail refunds to its 119,000 Florida subscribers if a waiver is not granted.

It goes without saying that health insurance companies in the state would like to avoid the financial hit that comes with issuing rebates. Instead, they argue that the health insurance market will be more stable if they are allowed to slowly reduce health insurance premiums or adjust patient care costs over the next three years.

And lest it sound like we are picking on Florida alone, it should be noted that waiver requests are also being discussed in Georgia, Iowa, Maine and South Carolina.

Tags : health care reform, medical loss ratios, medical insurance rebates

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