What Obamacare Got Right

Sometimes surprises arrive in the mail that quietly tell you how a new law is working or not.  This has recently been true for me of the Affordable Care Act,  popularly referenced as Obamacare.  Honestly, it is rare when I receive mail at home from my health insurer and it brings good news.  I expected one of the ubiquitous statements “This Is Not A Bill,” which I have mentally shortened to “TINAB.”  Instead, to my surprise, I found a check enclosed for more than a thousand dollars with the notation “Health Insurance Premium Rebate – Individual Subscriber.”  It was actually a check from my insurer.  While I will not name the company, this is the explanation accompanying the Rebate.  It is a refund of excess premiums from the insurance company as a result of Obamacare.  Here is what it said.

“This letter is to inform you that you will receive a rebate of a portion of your health insurance premiums.  This rebate is required by the Affordable Care Act – the health reform law.

The Affordable Care Act requires <your> Insurance Company to issue a rebate to you if <your> Insurance Company does not spend at least 80 percent of the premiums it receives on health care services, such as doctors and hospital bills, and activities to improve health care quality, such as efforts to improve patient safety.  No more than 20 percent of premiums may be spent on administrative costs such as salaries, sales, and advertising.  This requirement is referred to as the “Medical Loss Ratio”

standard or the “80/20 rule.  The 80 / 20 rule in the Affordable Care Act is intended to ensure that consumers get value for their health care dollars.  You can learn more about the 8/20 rule and other provisions of the health reform law at http://www.healthcare.gov/law/features/costs/value-for-premium/index.html.”

I spoke to others who received similar checks, generally less than mine, but the idea is interesting.  One woman commented that this was the first time she saw insurance companies with their “feet held to the fire” on premium issues.

The letter I received from my company continued along these lines:

What the Medical Loss Ratio Rule Means to You.  The Medical Loss Ratio rule is calculated on a State by State basis.  In Pennsylvania, <your> Insurance Company did not meet the Medical Loss Ratio standard.  In 2011, <your> Insurance Company spent only 67.1% of a total of $81,652,171.81 in premium dollars on health care and activities to improve health care quality.  Since it missed the 80 percent target in Pennsylvania by 12.9% of premiums it received, <your> Insurance Company must rebate 12.9% of your health insurance premiums.  We are required to provide this rebate to you by August 1, 2012, or apply this rebate to your premium that is due on or after August 1, 2012.

In other words, almost a third of premium dollars to the company from subscribers in 2011 in Pennsylvania was expended on overhead and could not be considered, even from the company’s own perspective, as having been used for care or to improve health care quality.  Salaries, sales and advertising were noted as overhead expenses.  There is no indication how much of this might include top level executive pay or bonuses or activities unrelated to health care.

The idea that health insurance premiums should bear some reasonable relationship to services provided and that insurers should self-report to the people who are subscribing and paying for the services is one notion that Obamacare got right.  The details can be argued but the concept has merit.  Why should we not know what we are paying for?

Other ideas that it would be difficult to argue include:

  • The provision that adult children up to age 26 should be able to be included on their parents’ health insurance.  Young people unable to find jobs in the current job market or holding part-time, seasonal, or probationary positions may be unable to obtain insurance on their own.  Obamacare allows them to be included.
  • The provision that seniors should be allowed to “close the doughnut hole” that can otherwise cause them to pay thousands annually in prescription drug costs.
  • The provision that preexisting conditions should not prevent applicants from obtaining health insurance, already effective for children and scheduled to go into effect for adults in 2014.
  • Preventative care coverage without co-pays.

Repeal and replace could mean repealing many provisions that make sense and that people want and need.

For more, listen to “50+ Planning Ahead” a weekly radio program on WCHE 1520 on every Wednesday from 4:30 pm to 5:00 pm with Janet Colliton, Colliton Law Assocs., PC, and Phil McFadden of Home Instead Senior Care.

About the Author Janet Colliton

Esquire, Colliton Law Associates, P.C. Janet Colliton has practiced law for over 38 years, 37 of them in Chester County, Pennsylvania, a suburb of Philadelphia. Her practice, Colliton Law Associates, PC, is limited to elder law, Medicaid, including advice, applications and appeals, and other benefits planning including Veterans benefits, life care and special needs planning, guardianships, retirement, and estate planning and administration.

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