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Texas Seeks Delay of Health Rebate Requirement

Ernie Shannon's picture

One of the many provisions in the Affordable Health Care Act of 2010 is the requirement for health insurance companies to spend at least 80 percent of the premiums they bring in on medical care or quality improvement leaving only 20 percent for overhead costs and profit. That’s good news to individuals and small companies getting squeezed by ever growing premiums. It’s bad news for health insurance companies already feeling like a piñata.

A GPB News report last week noted that Texas is one of 16 states approaching the U. S. Department of Health and Human Services requesting a delay on the implementation of what’s called the medical loss ratio plan (MLR). Medical loss ratio penalizes companies failing to bring administrative costs to 20 percent or under by requiring them to pay a rebate to customers. It is estimated that in Texas health insurance providers will owe their customers $160 million for what are now considered over charges.

A spokesman for America’s Health Insurance Plans, a national group that lobbies for health insurance companies, says the federal government is blaming insurers for rising premiums when the real culprits are doctors, hospitals, and drug and device companies.

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“The biggest issue is it doesn’t get at the soaring cost of medical care,” Robert Zirkelback said. “Instead, it imposed an arbitrary cap on health plan administrative costs. Some plans may have no choice but to exit the market altogether and people may lose the coverage they have today.”

Given that sentiment the Texas Department of Insurance has asked the federal government for a delay on the rebate plan. In that proposal, health insurance companies would have three years to phase in the rebate plan which would prevent companies from leaving Texas or going out of business.

In response to Zirkelbach’s comments, the GPB News report highlighted a Texas company named Standard Life and Casualty Insurance that it says spends up to 53 percent of premiums on health care with the remainder going to overhead and profit, that’s according to state documents the report said.

"I think it would surprise some Texas consumers that we have some plans out there that offer that little value," says Stacey Pogue of the Center for Public Policy Priorities in Austin. "The new rules that are put out would end business as usual for these types of low-value health plans, and that benefits all consumers."

Consequently, Texas’s Democratic representatives in Congress have asked Health and Human Services to turn down the state’s request for a delay in implementing MLR.