Despite the legal assault on President Barack Obama's health care reform law by Florida Attorney General Pam Bondi, one provision of the law is about to pay huge dividends to Florida consumers. Estimates are that health insurers in the state will owe Floridians more than $100 million in rebates this summer under what is known as the medical loss ratio rule. The U.S. Supreme Court is expected to rule shortly on the effort by Florida and other states to overturn the Patient Protection and Affordable Care Act, and if the entire law goes away, so does this significant consumer protection.
The medical loss ratio provisions of the health care reform law require insurers for individuals or small businesses to spend at least 80 percent of each premium dollar on direct medical care, rather than on big executive salaries, marketing and overhead. The threshold for large group plans is 85 percent of premiums. It is a valuable consumer protection ensuring that health insurance customers receive good value for their premiums. The rule also puts downward pressure on insurance rates.
A recent report by the nonprofit Kaiser Family Foundation estimated that the total rebate for consumers whose insurers failed to meet the medical loss ratio in 2011 is $1.3 billion nationwide and nearly $149 million in Florida. Those rebates will be distributed in August. A division of Consumer Reports and a Florida health advocacy group notes how the medical loss ratio standards are driving some health insurers to stop rate increases in the individual market. For instance, it notes that Humana requested average rate reductions of up to 12 percent to meet the 80 percent threshold.
The law is doing precisely what it was designed to do: force insurers to use premiums to pay for medical care or reduce rates. But leaders in Tallahassee have been hostile from the start. Florida Insurance Commissioner Kevin McCarty asked for and was properly denied an exemption to the rule for the state's insurers. He told the U.S. Department of Health and Human Services that without an exemption Florida's individual health insurance market would be destabilized. But that chaotic scenario has not happened.
The Supreme Court is expected to rule on the challenge to the Affordable Care Act any time now. McCarty's office says there is every possibility that insurers will not owe the rebate if the law is struck down. If this valuable benefit for Floridians goes away, people should know who is to blame — and they can look toward Tallahassee.