In general, while these rebates may appear to result in lower health insurance costs for consumers, the reality is that they do very little to lower health insurance premiums, and even less to actually lower health care costs. Few will actually receive a rebate, since a majority of consumers are covered by plans that don’t have to pay out such rebates. In Oregon and Washington, where most insurance carriers were already meeting, or are now meeting the MLR guidelines, most companies will not be required to issue any rebates at all. Further, workers who obtain coverage through their employment are unlikely to see any rebate money, since the rebates for the small-group and large-group markets who qualify will be sent directly to employers. In the individual market, a very small percentage of the U.S. population is likely to receive a rebate check. If they do receive a check, the average rebate is expected to be around $150.00, or $12.50 per month.
In addition to the number of rebates reaching consumers being less than advertised by the backers of the legislation, the rebates are also small enough to be of little assistance with the purchase of the insurance. For example, health insurance premiums in Vancouver and surrounding communities remain very high, and are increasing by an average range of 8 to 15 percent this year for small- and medium-size employers and individual families. It is not uncommon for individuals or employees to be paying $250 to $400 per month, and for families to be paying $1,000 to $1,400. A check for $12.50 doesn’t even make a dent in a premium that size.
While the new MLR rules do little to reduce the cost of health insurance, one fact that has become clear at this time is that the rules create incentives for insurers to eliminate or reduce the commissions currently being paid to insurance brokers. In their move to meet the MLR ratios, insurance carriers have already reduced and in some cases eliminated commissions to insurance brokers. As a professional insurance broker, this is very alarming, and not only due to the fact that my personal income is impacted by such action.
Many small employers will tell you that insurance brokers frequently serve as their informal human resource benefits department, where these brokers do much more than just sell insurance. In addition to researching the marketplace for the employer, implementing insurance, cafeteria plans and wellness programs, they are often responsible for creating employee communication literature and conducting employee educational meetings for the employer. They are also involved in problem troubleshooting, including billing, communication and claim issues for employees and their families. Direct representatives of insurance companies and health insurance exchange “navigators” will not be trained and may not be licensed to offer these services. This will require the employer to pay separately for the assistance, and the cost adds to the direct health insurance premium already being paid.
The Federal Medical Loss Ratio rules are having little impact on the net premiums being paid by consumers, and in fact may lead to added costs for employers, in order to maintain the level of care these employers have come to expect from their insurance broker advisors.
Greg Seifert is the president and CEO of Vancouver-based Biggs Insurance Services.