Texas Well and Healthy

Every year that the Affordable Care Act is law of the land, health care consumers get to see the benefits. One of those benefits is the result of the 80-20 rule, which says that insurers can’t just hike up your premiums to pad their own profits.

Instead, they have to spend at least 80% of your premium dollars on actual health care. rebate-infographicIf they spend less than 80% of what you pay for health care (and instead try to apply it to CEO compensation or marketing or the like), they have to refund the difference to you, the consumer.

This year, 726,000 Texas consumers will receive over $46 million in money back from their insurers because of this Affordable Care Act rule. The average for a Texas family receiving a rebate this year is about $95.

While that’s less than it was last year, that in itself may be a good sign. Insurers don’t want to pay the rebates, so more are obeying the rule and keeping to that baseline. If hiking up profits for profit’s sake isn’t profitable … well, why do it?

Check out our video from last year,  as our former community educator Cheasty Anderson explains this and other insurance industry regulations brought to you by the Affordable Care Act.

Written by: Christine Sinatra, Texans Care for Children

Disguised as an insurance company, our community educator explains how the health reform law foiled the plans of those insurers who thought they could hike up premiums just to pad their own profits with no consequence.

Good thing health reform came along with its 80-20 rule (the one that might have had you getting a check back from your insurer recently!) and rate review fixes, as Cheasty Anderson explains.

 

FOR IMMEDIATE RELEASE
August 1, 2012                                                            Contact: Christine Sinatra (512) 473-2274

Texas Women and Texans Whose Insurers Charged Too Much for Administrative Costs Last Year Have Milestones Today

AUSTIN – Important improvements in women’s preventive care and a milestone related to controlling health care spending coincided today with a Texas legislative hearing about what the Affordable Care Act means for our state. Even as lawmakers from two state senate committees heard testimony about the nation’s health reform law, 3.4 million Texas women were affected by provisions of ensuring women could receive preventive care, including screenings, check-ups and contraception, without out-of-pocket costs. Additionally, Wednesday is the deadline by which the Texas insurers who spent less than 80 percent of last year’s premiums on actual health care must distribute rebates to small businesses and policy-holders to make up the difference.

“These developments will not only protect Texans’ health, but also save them their hard-earned money,” said Mimi Garcia, Organizing Director with Texas Well and Healthy, a statewide grassroots campaign to improve health care in Texas. “These are big steps forward for women’s healthcare and for better value in health insurance premiums. They help Texans protect their health and their finances.”

Beginning today, all women’s health plans moving forward must include the preventive health care services recommended by the Institute of Medicine without co-payments, co-insurance, deductibles or other out-of-pocket costs. This includes well-woman visits, birth control, breastfeeding supports and screenings and counseling, for things ranging from gestational diabetes to domestic violence.

Today is also the deadline for health insurance companies that have to give rebates to their customers if they spent less than 80 percent of last year’s premium dollars on health care, as opposed to overhead and profits. The Affordable Care Act requires health insurance companies to follow this 80-20 rule, and those that failed to last year in Texas have been reimbursing small businesses and Texans with individual policies for the past several weeks. In 2012, over 1.5 million Texas families will have received a total of $167 million in refunds, averaging $187 per family.

For more on today’s hearing at the Texas legislature, which is being jointly held by the committee on health and human services and the committee on state affairs, visit http://www.senate.state.tx.us/.

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The Texas Well and Healthy campaign is a broad, grassroots coalition working to ensure that every Texan has access to comprehensive and affordable health insurance. It is a collaboration of members of Cover Texas Now and other health care coalitions in the state, and led by the Center for Public Policy Priorities, Children’s Defense Fund- Texas, Engage Texas and Texans Care for Children. More about the campaign is at http://texaswellandhealthy.org

In recent weeks, millions of Americans have been pleasantly surprised to find checks in the mail. The reason? The Affordable Care Act’s 80-20 rule requires that health insurance companies in the individual and small group markets spend no more than 20 percent of our premium dollars on advertising, profits, and administrative expenses. Those that didn’t spend 80 percent on healthcare and quality improvement in 2011 must rebate the difference to their beneficiaries by August 1st.

This means that 1.5 million Texans are receiving $167 million—an average rebate of $187! For those with individual Blue Cross Blue Shield policies, which account for the majority of Texas’ rebates, the average amount refunded is $316. Of those who qualify, some will receive checks directly, while others will see lower future premiums or a reimbursement back on their credit cards.  If you have a small group policy and your employer got the refund, you’ll still see the savings, most likely through lower premiums in the months ahead or in expanded benefits for the remainder of the year.

If you’re wondering whether you’ll be getting a rebate, the U.S. Department of Health and Human Services has developed an online tool to help. Simply click the link, choose your state and insurance company, and select “MLR”. You’ll be able to see what portion of your insurance premiums was spent on actual healthcare, along with the average refund amount for your insurance company. If you have a policy through a small company, you can check with your office manager or HR department to find out if you will be getting a rebate.

Marcus Denton is a health policy intern at the Center for Public Policy Priorities.

The 80-20 Rule Explained

As part of our “Get to Work, Texas” series on what the state needs to do now that health reform has been upheld by the Court, we are encouraging folks today to get in on the action on social media. Will you help us spread the word about how the Affordable Care Act is putting, on average, $187 back into the pockets of nearly 2 million Texans? On our campaign Facebook page, we have some images up today that you can share that explains how it all works. We also are republishing this blog post from the spring that explains how it is that insurers will be paying $1.1 billion to Americans who purchased their own health care last year.

You know what I love? Some unexpected cash! Walking to my mailbox and finding an unexpected money is pretty high on the list of things that make me happy. Thanks to the Affordable Care Act, close to 2 million Texans are going to experience one of my very favorite things this summer.

How?

According to the 80/20 rule of the Affordable Care Act, insurance companies have to spend at least 80% of your premiums on your care or improving the quality of your care. The other 20% can go to administrative costs, advertisements, executive bonuses, and company profits. If, at the end of the year, companies have not spent 80% of your premium on patient care, they have to send out rebates.

The U.S. government says that this year 1.5 million Texans will receive more than $167 million in rebates because of the 80/20 Rule.  That’s an average of $187 per rebate. True, it’s not enough to retire on, but when was the last time a health insurance company sent you money?

Before the ACA a lot of states already had rules about how much insurance companies can profit from selling health insurance plans, but Texas was not one of them. In fact, there were health insurers in Texas that were spending less than half of the premium dollars they collected on health care.

Texans will be getting the highest amount of rebates of any state. Almost 92% of all Texans who buy their own policies are likely to get a rebate. Why? As other states worked to protect their people from irresponsible hikes in healthcare premiums, Texas rates were left to grow unregulated. Basically Texans have subsidized insurance profits that were capped elsewhere in the country.

By August 1, millions of these rebates will appear in mailboxes across the country.

Not getting a rebate? The 80/20 Rule is still helping you. Many insurance companies are changing the way they do business, devoting more money to quality improvements and health care. Others are lowering their premiums or not increasing them as much as they would have in order to comply with the law, so they won’t have to send out rebates in the future.

Unexpected money is great, but more importantly, the 80/20 Rule is another way that the Affordable Care Act is helping to control health insurance costs.

Original post by: Juandrea Bates, guest blogger

Creative commons photo credit: History In An Hour

In 1974, President Nixon wrote his proposal to Congress for the implementation of his Comprehensive Health Insurance Plan. In it, he notes that “the average cost of a day of hospital care has exceeded $110” ($480.79 in today’s dollars) and that the “average cost of delivering a baby and providing postnatal care approaches $1000” ($4,370.85 today). These findings motivated him to promote his new plan, one which he said wouldn’t require anyone to pay more than he or she could afford.

Reading this got me interested in finding out more about the average costs of healthcare today. The average cost of one day in the hospital in Texas floored me: $1,943 (as of 2010).* The cost of delivering a baby varies a lot, but nearly always costs more than $8,000.

Fast-rising costs are one reason health care reform is so important. What’s great about the Affordable Care Act is that it doesn’t try to bring down costs by cutting back on valuable health care services shown to save lives, like prevention and screenings. Covering things like preventive screenings, mental health treatment, and autism makes good fiscal sense, especially when it comes to children. Health insurance premiums might even come down because of such coverage.

Instead, as you might have seen this week on the website of Fox News of all places, the Affordable Care Act helps control rising premiums through rate reviews and the 80-20 rule:

All proposed rate increases of 10% or more must be gone over by independent experts. . . .If the planned price hikes don’t stand up to scrutiny, states can negotiate them down or, where authorized, deny them outright. . . . Later this year, the “medical loss ratios” of health insurers also will be posted, giving you a closer look at whether your insurer is meeting the health care law’s requirement that at least 80% of your premium be spent directly on medical care. If that’s not the case, the insurance company will now owe you a rebate for the difference.

With rising costs and increasingly prevalent medical problems, bringing down costs by making sure insurers aren’t padding their bottom line is just smart. This is something that touches all of us, and it is one reason reform is crucial.

By Gina Watts, Austin, Texas

* In Nixon’s writing, it isn’t clear whether he is talking about an inpatient’s average cost or an outpatient’s, but  this number is for inpatients.

Dear Cheasty,

The small group coverage option

This is an interesting time to talk about non-profits given the economic collapse and the health care reform act. Would you be able to write a few paragraphs regarding the impact of healthcare reform, the rising costs and the challenges non-profits may feel with regard to offering benefits to their employees?

Thank you,
Needing to Know about Non-Profits

 

Dear Non-Profits,

Over the last 10 or 15 years, health care costs in the commercial insurance industry (i.e. anything that isn’t Medicaid or Medicare) have ballooned.  Therefore, the cost of providing health insurance for employees has gotten harder and harder. This is true for both private industry as well as non-profits.

To make matters worse, most non-profits, like small businesses, may be saddled with the curse of the small group plan where prices are higher in order to cover the larger proportion of policy holders in the group with greater (read: costlier) health care needs.  As a result, many non-profits are having to make tough decisions about the quality of coverage they can afford to offer their employees, what percent of cost-sharing the organization can afford to bear, etc.  In the end, both employer and employee spend more, but get weaker benefits compared to years past.

The Affordable Care Act (the health reform law Congress passed in March, 2010) has been steadily making progress towards reducing insurance costs for small businesses and non-profits. And, when the law is fully implemented in 2014, it will go even further towards controlling costs in the health care industry at large.

Right now, however, here are some of the ways the ACA is helping make health insurance more affordable for non-profits:

  1. In the first place, small non-profits (fewer than 25 employees) can qualify for a refund up to 25% of the cost of purchasing insurance for their employees. Check with your tax accountant to see if you qualify, and whether you’ve filed the appropriate paperwork. In 2014, that refund cap will be even higher – you could get up to 35% back!
  2. Second, an industry regulation called “Medical Loss Ratio” (commonly referred to as the “80/20 Rule”) stipulates that insurance companies MUST spend at least 80% of the premium dollars they collect on the delivery of health care services, and only 20% on administration, profits, and payouts to shareholders. If they fail to make those percentages, then the insurer has to refund money to its beneficiaries in order to comply with the 80/20 Rule. This is a significant change in the way most insurers did business before, and the result is fantastic for people in the small group and individual markets.

To sum it all up, you stand a good chance of getting money back this summer.  In fact, Texas – with its previously unregulated market – is benefiting the most of any state. A new report from the Kaiser Family Foundation has estimated that this year 1.8 million Texans will receive more than $186 million in rebates because of the 80/20 Rule.

Some insurers are retroactively lowering premium payments for some small businesses, while others have decided to start providing free preventive health care (checkups, screenings, etc) for beneficiaries ahead of schedule to bring their numbers up to scratch. (In 2014, free preventive care will be the law of the land and we’ll all get those annual exams free.)

So that’s what non-profits need to know about health reform right now.

In less than two years – on January 1, 2014, to be precise! – you’ll need to know about a whole raft of ACA provisions that are going to control costs and enhance coverage in the insurance industry in general, but I’m just going to skim over them right now in the interest of time.

  1. The first thing to know is that insurers will no longer be able to deny coverage or even charge more for people with pre-existing conditions. That will lower costs for everybody, but especially in small group markets.
  2. Secondly, all insurance plans will have to cover 10 categories of health coverage called the “Essential Health Benefits.” This will ensure your employees get more robust coverage under whatever insurance plan you choose.
  3. And lastly, with the Health Insurance Exchanges for individuals and small businesses, you and your employees will have many more options of how to best guarantee the affordability of coverage for all.

The Affordable Care Act isn’t a guaranteed panacea for all the ills of the health care crisis in the United States, but it is a remarkable effort to begin fixing the problem, one step at a time. I hope this helps explain what non-profits should be looking for, both now and in the next few years.

 

To a well and healthy Texas,
Cheasty Anderson

 

Dear Cheasty,

Hello. I work for a small company and one of my co-workers just told me that this year our insurance premiums are being reduced. I asked some more questions and he told me that our entire office might even get a refund check in the mail from the insurance company this year. I was delighted to hear that of course! I was wondering, though, what’s going on? Is this true? And if it is true, is this change because of health reform?

Thank you,
Laura from Houston

Dear LFH,

I know where you’re coming from. Reduced premiums? Getting a refund check from your insurance company? That’s NOT how the world as we know it works – surely we simply failed to notice the rabbit hole we must have fallen into! Well hang on to your shorts, LFH, because have I got some great news for you.

First of all, yes.

Health reform – also known as “Obamacare,” “the Affordable Care Act,” and “the ACA,” is responsible for some reductions in premiums and refund checks from insurance companies coming this year. While I wish I could guarantee you that your personal premium would indeed be reduced, I can’t speak to your individual case. I can say, however, that some small businesses in Texas have indeed seen reductions in their premiums in the last few months.  This is great news, but not a guarantee that premiums will drop for everybody. In fact, rather than reducing premiums across the board, it is more accurate to say that Obamacare is slowing the ludicrous speed at which premiums rise over time.  It is doing this in two ways – through “rate review” and the “80-20 rule”.

Let’s discuss them one at a time to fully explain.

Believe it or not, prior to this law, insurance companies could raise premiums as much as they wanted to, and with no explanation for why they were going up.  I received a letter from a guy who’d seen a 700% increase in his policy over 6 years even though he had never gotten sick during that whole time. Outrageous!

Now, because of a provision called “rate review” insurance companies can still raise premiums, but they must justify rate increases over 10%.  Those justifications are posted publicly – so you can see why rates are going up – and the justifications are reviewed by the Texas Department of Insurance to determine if the increase is based on reasonable assumptions and solid evidence.  For insurance companies, this will be an unprecedented level of scrutiny and transparency, and will do two things: (1) it will help keep you the consumer informed, and (2) it will help hold down premium increases over time.  Nice.

Now for the fun stuff: REFUND CHECKS!!

This is pretty exciting, and it’s all thanks to a provision in Obamacare called “the 80-20 rule”. You may have heard of this.  Until recently some people were (and some still are) calling it “medical loss ratio” or “MLR” for short, but that name doesn’t make a lot of sense. What it really means is this:

Insurance companies now have to spend at least 80% of all the money they collect in premium payments on actual medical care, and they can spend no more than 20% of that money on administration and profits. 

For some insurance companies, this isn’t a problem – they already hit that mark – but others that offer less value to their customers are going to have to make some big changes to how they do business. And here’s the kicker!  Those companies that don’t hit the 80-20 mark will have to issue refunds to their customers, starting August 1st of this year. In fact, some companies are reducing premiums now to avoid sending refunds out later.

This is probably what happened with your company’s insurance, LFH. That’s great news for Texans, especially in these tough economic times!

So, Laura from Houston, I hope these short paragraphs have helped explain exactly what might be going on with your insurance premiums this year. I wish I could promise that all of my readers would get reductions in premiums and a big check in the mail, but at least we know that many Texans will. And most importantly, I hope you feel better knowing that Obamacare is taking some really important steps toward improving the way health care works in this country. We’ve already seen some really great benefits so far, and more are coming in 2014.

So, keep your eyes peeled for a great health care future!

To a well and healthy Texas,
Cheasty