Tuesday, May 15, 2012

Health Insurance Rebates: A $1.3 Billion Non-Event

The Disease Management Care Blog has a lingering weakness for garden statuary. It thinks that nothing quite compliments phlox and snapdragons better than a weenie cherub or squatting amphibian.

The skeptical DMCB spouse disagrees. Tired of  kneeling trolls disturbing her carefully laid mulch, she questions whether her husband's admiration for toadstools, rabbits or fairies projects the right level of curbside sophistication. 

Skepticism may also be a reaction of 16 million Americans who are about to discover a health insurance garden gnome rebate check in their mailbox.  According to The Hill, the commercial insurers that haven't met the Affordable Care Act's 80 to 85 percent medical loss ratio rule will have to give back a total of $1.3 billion in premium rebates this summer. What's more, the checks will have to be accompanied by a statement that they're the result of Affordable Care Act.

The DMCB thinks this will turn out to be a non-event for four reasons:

1) What Does This Really Mean to an Individual?

When the DMCB does the math, $1.3 billion spread over 16 million eligible Americans works out to $81.25.  This article says the amount will be higher at $127.  While the DMCB thinks any free cash is always welcome, its inner behavioral economist doesn't think a check for around a hundred bucks is going to generate much buzz among health care consumers, especially among a population segment that can already afford to buy commercial insurance. 

2) Remember the Tax Rebate Checks of 2008?

Neither can the DMCB. But tracking polls at the time suggested they did little to capture America's imagination or boost consumer confidence. That doesn't mean that Washington DC doesn't continue believe that giving something for nothing will generate gratitude and votes. All the better if it's done just prior to a major election and humiliates health insurers.

3) Speaking of Which....

Why aren't the health insurers pushing back by pointing out that the rebates pale next to the cost of the ACA's mandates and that a one-size-fits-all medical loss ratio rule is unfair to the individual insurance market? Could it have something to do with $1 trillion in new business or the threat of being resurrected as an anti-progressive bogeyman? The DMCB calculates that $1.3 billion will be viewed by consumers as the price of doing business with a hostile federal government. 

4) Plus, Is A Billion A Lot?  Really?

The DMCB looks forward to hearing our chattering politicians extol the rebate of "$1.3 billion." While that used to sound like a lot, our unending budget fiasco has since taught Americans that the term "billion" is now synonymous with a federal budget rounding error. Who can forget Harry Reid's quote that the billions saved in passing tort reform was insignificant?

Next stop for the DMCB will be a bunch of solar powered lamps and a volleyball-sized mirrored gazing ball.  What the Administration has planned for our health insurers is another matter.

1 comment:

H G Stern said...

As usual, excellent post - just enough snark, excellent analysis.

I'd add two things: first, many of these refunds will be taxable. And since they represent premiums paid the previous year, they'll require amended returns. Calculate that cost vs the $83 (or $127)(or whatever).

Second, there's nothing in the regs (as currently espoused by HHS Secretary Shecantbeserious) prohibiting insurers from noting that O'Care has indeed caused major premium increases. Except that the last time a carrier tried this kind of stunt, they were slapped pretty hard (Humana vs Medicare).