ST. PAUL, Minn. -- Health insurance refund checks are arriving in mail boxes across the country due to a provision of the Affordable Care Act designed to curb what insurers spend on overhead.
"Health insurance companies had to spend at least 80 percent of their premiums on actual health care," said Sen. Al Franken, who authored that section of the federal health reform legislation now known to many as ObamaCare.
The "medical loss ratio" may sound complex, but in its simplest terms it requires that 80 percent of premiums must go to direct health care, leaving only 20 percent to go toward administrative overhead, including profits, marketing and executive salaries.
For larger group plans, the threshold is 85 percent to care, versus 15 percent for administration.
"I got this from a Minnesota law, which was passed in 1993," Franken added.
Indeed, the Minnesota version of the medical loss ratio has been on the books for 20 years.
In fact, Commerce Commissioner Mike Rothman told reporters Monday that 91 percent of health premiums paid in Minnesota this year are going to direct health care.
"That leaves less than a dime of every dollar for administrative costs," Rothman remarked.
"The benefit is that Minnesota has had -- and has -- some of the lowest rates in the country for premiums."
The extra part Franken added to ObamaCare is that companies that miss the 80/20 mark must refund the difference to policy holders or employers.
St. Mark's Episcopal Cathedral in Loring Park, for example, is one of the employers getting a refund -- $25,000 this year -- from its out-of-state insurer.
"It means a great deal to us because we'd far rather be spending our money on our ministries of outreach, of which we have many -- especially our feeding ministries," she said.
Last year, more than 120,000 refund checks went out to Minnesota employers and individual policy holders, but the number of recipients is expected to drop to 10,000.
Both Rothman and Franken said that's actually a good sign because only two insurance carriers missed the 80/20 rule and had to implement refunds.
They say it's a sign that most companies are being more careful about how they spend customers' money, and they are more closely scrutinizing how much they charge in premiums in the first place.
The rate of growth in health care premiums has also slowed since 2011, another development Franken asserts can be traced to the medical loss ratio.
"(What) they're trying to do is make sure 80 percent is spent on actual health care or 85 percent for large group plans. And it's working," Franken asserted.
Back in Washington, Republican Senators Rand Paul of Kentucky and Ted Cruz of Texas are pushing to strip funding from ObamaCare, as part of a trade-off to avoid a government shutdown.
"I just don't think that Minnesotans and Americans want to re-fight that fight again."
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