Only 10,000 Mainers see rebates as Obamacare provision takes effect

Posted Aug. 05, 2012, at 6:07 a.m.

LEWISTON, Maine — About 10,000 Mainers will benefit from a provision of the federal Affordable Care Act that went into effect Aug. 1, forcing health insurance companies to spend less on administration and more on the delivery of health benefits.

Nationwide, insurance companies last week issued more than $1 billion in rebates to about 13 million Americans.

Only one company, Connecticut General Life Insurance Co., known as Cigna, is required to issue rebates in Maine, said Doug Dunbar of the Maine Department of Professional and Financial Regulation.

Dunbar said in an email message that Cigna was required to issue about $2.6 million in rebates for 10,600 policies in their large group business in Maine.

“Because most employers pay a portion of the premium, the rebate will be split between the employer and the employee,” Dunbar wrote. “The rebate can be a premium credit or reimbursement.”

But while those on private insurance plans in many other states are starting to receive those checks or credits toward their insurance premiums — in some cases as much as $500 — most people on privately funded plans in Maine will see nothing.

This is particularly true for Mainers who purchase their own insurance policies and do not belong to a large group plan. Part of the reason for that is, in 2011, the state requested and was granted waivers that allowed companies selling insurance in Maine to spend more on administration than was allowed under the ACA.

The U.S. Department of Health and Human Services granted Maine those waivers because it was concerned that if it didn’t, based on information provided by Maine, one of the largest providers of those types of policies — MEGA Life — would stop selling and servicing policies in Maine.

Nearly 37,000 Maine residents in 2010 obtained health insurance through the individual health insurance market, according to the federal DHHS.

About 14,000 of those policies were issued by MEGA Life. The company’s threat to leave the market here if forced to meet the new federal standard pushed the state to seek the waiver.

In general, the new federal law requires insurance companies to spend at least 80 percent of the amount they take in from premiums on actual health care services. That means only 20 percent can go toward a company’s administration of the plans and profit.

The waiver for individual market providers in Maine, like MEGA Life, allowed them to spend only 65 percent of what they take in from premiums on services, with the remaining 35 percent going toward administration costs and profits. As they met those reduced standards, MEGA Life and other individual market insurers in Maine were not required to issue rebates here, Dunbar said.

The state agreed to request the waiver at the time because Maine’s individual insurance market was deemed too fragile and the loss of MEGA Life would have left thousands without health coverage, said Mitchell Stein, policy director for Consumers for Affordable Health Care, an Augusta-based health care advocacy group.

Stein said Mia Koffman, commissioner of the Maine Bureau of Insurance at the time, was “between a rock and a hard place.” If the state didn’t request the waiver, more than 13,000 policies would have been put in jeopardy and people would have lost their health care coverage.

State waivers are only in effect through 2013, although there is a provision in the waiver that could allow the state to extend that exemption in 2013, Stein said.

He said that in 2014 it’s possible Mainers would start seeing rebate checks or premium credits, but he hoped that wasn’t the case.

“My bottom line on the issue of the rebates is the best possible outcome is that no one receives a rebate because all of the insurance companies are devoting an appropriate amount of their premium dollars toward paying out claims,” Stein said. “So no one gets a rebate because everybody is playing by the rules.”

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