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This article was published 11 year(s) and 9 month(s) ago

Tierney touts little-known component of Obamacare

cstevens

December 17, 2013 by cstevens

LYNN – President Barack Obama’s Affordable Care Act has taken its share of abuse, but one component that Rep. John Tierney said can’t be faulted is the success of the 80/20 rule, or the medical loss ratio.”I’m glad this medical loss ratio has played the role it has,” he said during a conference call Monday.The seemingly little-known component of the Affordable Care Act went into effect in 2011, when insurance companies were required to file a report outlining how premium dollars were spent. Tierney said it forces insurers to spend a minimum of 80-cents of every dollar on actual health care services and only up to 20 percent on administrative costs and salaries. Companies that exceed that benchmark on administrative costs must issue rebate checks to policyholders.”It’s 85 percent for large companies,” Tierney said. “The purpose is to encourage companies to spend a reasonable amount of money on health care, and the rebates are the backstop.”The gain is efficiency, he added.In the first year the average rebate was $100 per family nationwide.According to the Department of Health and Human services, rebates must be paid by Aug. 1 each year. Enrollees owed a rebate might see a reduction in their premiums, receive a rebate check, or, if they paid by credit card or debit card, a lump-sum reimbursement on the account used.If an employer pays the premium then the rebate goes to the employer, however, the “enrollee” should still receive a rebate that is proportional to the premium amount paid.Tierney said when they were developing the rule he heard “incredible witness testimony” from former health care workers who stated their bosses urged them to spend less on actual medical services in order to save the company money. One company spent 56.1 percent of each dollar on administrative costs rather than health care, he said.There were also reports that showed companies felt spending more on care versus administrative costs was simply not good business, Tierney said.”They believed the lower the ration the higher the profit,” he said.Xavier Becerra, D-Calif, who joined Tierney on the conference call, also praised the program. He said 1.5 million Californians received rebates last year that averaged $71 per family.DeAnn Friedholm, director of Health Reform, Consumers Union, said she heard from a number of insured families that were shocked when they received a rebate check.”In 2012 77.8 million saved $3.4 billion on premiums,” Tierney said. “The numbers for 2013 are working estimates but they reflect $241 million in rebates. The issue is hopefully rebates go down and people get better plans that spend more dollars on medical care.”

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