Photo by Pepi Stojanovski on UnsplashAUSTIN, TEXAS--For the third time since the inception of the Affordable Care Act (Obamacare), Texans who bought Blue Cross Blue Shield plans on healthcare.gov in 2018 are receiving refunds for premiums they paid that year. Unlike prior years, though not everyone is getting a check in the mail. Those who continue to have coverage with BCBSTX received letters this week letting them know of the refund, with the caveat that their refunds would apply to outstanding balances on their account. According to the letter:
Your MLR rebate will be applied as a credit to the balance that is due on your next bill. If your credit is larger than the amount due on your next bill, the remaining MLR rebate balance will be applied to subsequent monthly bills.
Only those who do not pay any monthly premiums because their ACA credits wipe out the monthly bill, and those who no longer have coverage with BCBSTX will receive checks.
What is a MLR rebate?
MLR stands for Medical Loss Ratio. It refers to the requirement in the Affordable Care Act that participating insurance providers must spend a minimum of 80 percent of the premiums it receives on health care services, more specifically, doctors, hospital bills, and to improve health care quality. No more than 20 percent of the premiums may be spent on administration, salaries, sales, or advertising.
According to the company, the types of activities that count toward the 80 percent rule include:
Among other things, activities to improve the quality of care are designed to improve health outcomes for members. For example, these activities may include:
- Enhance patient safety
- Promote health and wellness
- Improve transparency
- Support meaningful use of health information technology, or
- Prevent hospital readmissions
Blue Cross claims that the MLR difference for 2018 was caused by an additional payment they received for 2018 from the federal government, triggered by the outcome of a Supreme Court decision on April 27, 2020, in the case of Main Community Health Options v. United States.
The IRS has a FAQ sheet regarding MLR rebates.
How is the rebate calculated?
Each state calculates the ratio of providers in its state, applying the ACA's 80/20 rule. After recalculating the ratio for BCBSTX for 2018 following the additional federal payment, the insurance provider was shown to have only spent 75.2 percent of the $2,676,652,488 in premiums on actual healthcare. (Yes, that's $2.6 billion.)
Since BCBSTX missed the target of 80 percent by 4.8 percent, the company must, by law, refund 4.8% of each customer's premiums for the year, 2.8 percent of which was previously refunded under the older calculation. That means the checks or credits now owed to 2018 customers amount to 2 percent of the premiums they paid.
It is worth noting that because the purchase of insurance on the Healthcare Marketplace often utilizes tax credits paid in advance to reduce the premiums for eligible customers, the MLR refunds are not affected by the fact that in many cases the customer themselves may not have paid the premiums at all.
That means a person who qualified for enough tax credit to pay $0 in monthly insurance premiums to BCBSTX on the Marketplace in 2018 has already received 2.8 percent of the premiums paid by the federal government for them in the form of monthly tax credits, and now will receive another 2 percent of those federally funded premiums.
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