Thousands of Texas consumers could be due rebates this summer after the federal government rejected the state's request to phase in new requirements that health insurers selling policies to individuals pay at least 80 percent of premiums on medical expenses.
Friday's decision by the Health and Human Services Department means that Texans who held policies in 2011 will get money back from insurers who failed to meet that threshold. Based on 2010 regulatory filings, close to 700,000 Texans would have shared about $160 million in rebates from 22 insurers who did not meet the 80 percent rule. Twelve insurers met it.The amount of money actually refunded will depend on 2011 results, which have not been reported. Insurers changed their operations in anticipation of the law, analysts said.Consumer advocates hailed the decision, while state regulators were critical."Texas' request put insurers' profits over consumers' pocketbooks and would have set up the state to miss a critical opportunity to slow rising insurance premiums," said Blake Hutson of Consumers Union. "Today's decision is a victory for Texas consumers who buy insurance on their own."The Texas Department of Insurance said in a statement: "A reasonable, responsible phased-in approach would still have afforded rebates to Texas consumers without risking disruption, dislocation and withdrawal of carriers in the individual market."The new standard, called the medical loss ratio 80/20 rule, went into effect Jan. 1, 2011, as part of the 2010 healthcare overhaul. Rebates will be payable Aug. 1, said Gary Cohen, Health and Human Services director of oversight.Cohen said his agency determined that the new rule "will not destabilize" the state's market for individual health insurance, as the state contended when it requested a waiver last July. Cohen called the state individual health insurance market "very robust and competitive" and said its largest insurers have indicated that they will continue writing policies in Texas.He said insurers appear to be making a number of moves to meet the standard, including lowering both premiums and overhead.Cohen said Health and Human Services has now denied nine states' requests for a waiver from the rule and at least partly granted six. Two are pending.The waiver request from then-Texas Insurance Commissioner Mike Geeslin argued that the new rule "is likely to stifle competition in the market and constrain many Texans' access to coverage." Geeslin, whose term expired last year, said more than 700,000 Texans get individual health insurance, as opposed to group coverage offered by employers.As part of that request, the state asked that the insurers instead be required to meet a lower medical loss ratio, starting at 71 percent in 2011 and rising to 80 percent in 2014.In Friday's statement, the Insurance Department said the federal agency "asserted that few issuers are reasonably likely to exit the individual market in Texas. The [Texas] Department's application clearly showed otherwise. Of the 34 Texas carriers subject to the law, 23 will pay rebates based on 2010 data; at the 80 percent [loss ratio] threshold, these rebates will absorb the net underwriting profit for the entire individual market."According to regulatory filings, insurers reported a net underwriting profit of $153.4 million on $1.8 billion in premiums in 2010.Cohen, in a conference call with reporters, noted that Texas law requires insurers who withdraw from the state to stay out at least five years. That will likely prevent insurers from leaving Texas, he said, because under the healthcare law, individuals will have to buy health coverage starting in 2014, and insurers won't want to be shut out of such a big market.Using the 2010 figures, the largest rebate, $89.6 million, would have been paid by Blue Cross Blue Shield of Texas. With about 55 percent of the market, Blue Cross is the state's largest writer of individual health policies. That rebate would have averaged about $220 for each of 407,187 people covered.Blue Cross, according to state regulatory filings, paid out 69.9 percent of its $937 million in individual health premiums in medical benefits after adjustments allowed under the rule.In a statement issued Friday, Richardson-based Blue Cross said it will "fulfill our obligations" under the law, although it said "it would be premature to predict the likelihood of potential rebates." The company said it will continue to "improve the quality of healthcare, increase efficiencies and help improve medical outcomes for our members."The lowest medical cost ratio for a Texas individual-health insurer in 2010 was 49.9 percent by Citizens National Life Insurance Co. It would have paid a rebate of $560,220 on its nearly $2.1 million in premiums, according to regulators.Jim Fuquay, 817-390-7552Twitter: @jimfuquayInsurers' medical
expenses
Adjusted percentages of premiums paid for medical benefits in 2010 by Texas' five largest writers of individual health insurance:
Blue Cross Blue Shield, 69.9 percent
Aetna, 76.9 percent
Golden Rule, 62.4 percent
Humana, 60.5 percent
Time, 73.7 percent
Source: U.S. Health and Human Services Department
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