New Jersey employers enrolled in large- and small-group health insurance plans will receive a share of $7.5 million in reimbursements from insurers that failed to spend at least 85 percent of premiums on medical care and quality in 2011, according to an announcement from the U.S. Department of Health and Human Services.
Tara Adams Ragone, a research fellow at Seton Hall University School of Law's Center for Health and Pharmaceutical Law and Policy, said it's the first time large-group insurers are regulated at any government level and required to pay rebates for failing to comply with the so-called medical loss ratio, or MLR, provision of the Affordable Care Act that establishes the 85 percent benchmark. However, if the Supreme Court rules the act is unconstitutional — a decision that could come as early as Monday — employers won't see those checks, Ragone said.
The Kaiser Family Foundation estimated in April that employers enrolled in large-and small-group plans would receive a total of $100 million in rebates, based on analysis of insurer filings to the National Association of Insurance Commissioners. But Ragone said HHS' significantly lower numbers — which show that no small-group insurers in the state failed to meet the federal requirement — are "much more consistent with what New Jersey insurers had declared in the past."
"New Jersey's providers, historically, have been closer to the MLR requirement, even when it didn't exist," Ragone said. "Only 4 percent of New Jersey's market will be paying this rebate. Small-group insurers could still have to pay rebates in New Jersey — since the state methodology for MLR is much more stringent — but it shouldn't be significant for them."
While the state does not impose the MLR requirement on large-group providers, Ragone said even if it decides to do so in the near future, employers enrolled in those plans should not expect an influx of rebates, based on the insurers' 2010 and 2008 compliance data. According to Ragone, in 2010, 74 percent of large-group companies in New Jersey reported an MLR above the state's 85 percent minimum for premium spending on medical care — which does not include credits in care expenses for quality improvements and deductions in administrative expenses for taxes, as the federal formula allows — and in 2008, the average MLR among the providers exceeded the state's requirement.
"Virtually everyone has met the 85 percent requirement, so the federal data is more consistent with these numbers," Ragone said. "It would've been very surprising if (Kaiser's) numbers had been accurate."