Agents, Not Rebates, Help Consumers Get a Better Deal on Health Insurance
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By Janet Trautwein
Some Americans recently began receiving checks in the mail from their health insurers.
These "rebates" were required by the federal healthcare reform law's "medical loss ratio" (MLR) rules, which mandate that insurers spend at least 80 percent of premiums on healthcare expenses.
According to the Obama Administration, the rebates prove that the MLRs are working -- that they encourage "insurers to give you better value and [hold] them accountable if they don't."
But these rebates won't lower most Americans' health costs. They may make it more difficult for people to secure affordable health insurance.
Not everyone will get a rebate. At least 66 million consumers are covered by plans that don't have to pay out rebates.
Folks who get coverage through work may not see cash. Rebates for the 8.6 million Americans in the small- and large-group markets who qualify will be sent to their employers.
In the individual market, some 2.6 million households qualify for rebates. They'll receive an average of about $152, or $12.67 a month.
All told, less than 5 percent of the U.S. population will receive a rebate check.
The rebates are also smaller than expected. A few months ago, analysts predicted that the rebates would total $1.3 billion and reach 15.8 million Americans. The actual amount will be $200 million less -- and impact 3 million fewer people.
Meanwhile, annual family premiums for those with employer-sponsored insurance rose 9 percent in 2010 -- triple the pace of wages -- to an average of $15,073.
MLR rules can also reduce consumers' healthcare choices. According to the Congressional Budget Office (CBO), strict MLR requirements have the potential to "substantially reduce flexibility in terms of the types, prices, and number of private sellers of health insurance." The CBO further warns that some insurers "could exit the market entirely."
MLRs are destroying jobs -- and making it harder for consumers and businesses to knowledgeably navigate the health insurance marketplace -- by putting health insurance brokers out of work.
According to a 2010 Congressional Research Service report, the MLR rule creates incentives for insurers to cut back on the use of brokers or reduce their commissions. As the Government Accountability Office noted in a report on how insurers were reacting to MLR rules, "almost all...said they had decreased or planned to decrease commissions to brokers."
That means less help for consumers and businesses who rely on brokers to help them make smart decisions about health insurance and advocate on their behalf when issues arise.
A report by the Center for Studying Health System Change found that in addition to comparing and outlining health plan features and options, brokers essentially serve as human resources departments for small employers by assisting employees with claims and questions about benefits.
Agents and brokers help individuals and small businesses save money on their health insurance -- far more than the MLRs and their attendant rebate checks do.
Janet Trautwein is CEO of the National Association of Health Underwriters.
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