Michigan Consumers to Receive $89 Million in Medical Loss Ratio Rebates

Health insurers in Michigan were ordered to pay policyholders as much $89 million in medical loss ratio rebates following a ruling, federal health regulators announced on Monday. This ruling comes less than one month after the federal government announced that the health insurance industry could owe millions of consumers rebates thanks to health care reform’s medical loss ratio.

Health Insurance Premiums Given Dollar Guidelines

After the Senate decided in 2009 that health insurance premiums were not being applied to medical claims appropriately, the government decided companies must follow specific guidelines of distribution as determined by the medical loss ratio.

The ratio requires companies to set aside 85 percent of health insurance premium dollars for large-group plans and 80 percent of dollars for individual and small-group plans to ensure consumers’ medical treatments are be covered. If the appropriate amount of money from health insurance premiums is not set aside, the companies will be required to issue rebates to consumers.

Earlier this month, the Obama administration announced it had tweaked one portion of the medical loss ratio, requiring insurers to not only pay rebates, but to tax-free medical loss ratio rebates. Weeks later, Michigan is one of the first states to determine an amount that its insurers will be required to pay in refunds.

Millions in Medical Loss Ratio Rebates to be Issued

The ruling issued by federal health regulators required insurers in the state that have not stayed within the medical loss ratio to pay to consumers. While an exact estimate for how much each Michigan consumer might receive was not provided, companies are expected to issue up to $89 million in total rebate checks or future credit on monthly health premiums over the next three years.

Shortly after the ruling was issued, Insurance Commissioner, Kevin Clinton, sought an exemption to this payment rule with the support of Gov. Rick Snyder.

He explained in a statement that he worries some insurers will have difficulty reaching the requirements and as a result may stop selling insurance–something that could mean “increased costs and fewer consumer choices.” The HHS denied the state’s exemption request.

The insurers to be responsible for issuing rebates include Golden Rule Insurance Co. (United Healthcare), Time Insurance (Assurant), Aetna, Humana and World Insurance Co. (American Enterprise).