Those ACA Medical Loss Ratio Refunds

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I received what at first I thought was some junk mail in yesterday’s snail mail. It looked like one of those promotions from a company trying to make you think you’re already a customer but the sender was a company I had never heard of. Healthy Alliance Life Insurance Company.

Well, that ws a dead giveway for junk mail. I don’t HAVE any life insurnace and have no plan to BUY any life insurance. Into the trash pile it went. But today, as I was about to toss that trash pile, for some reason, I opened the envelope. It turns out that the sender is actually the parent company of Anthem who provides my health insurance but “Anthem” was not visible from the outside of the letter.

Turns out the letter was a notification and rebate check driven by the company’s administrative costs exceeding the 80/20 Medical Loss Ratio test dictated by the Affordable Care Act. (ACA). Turns out Anthem’s admin spending was 21.4% of insurance premiums so they had to refund 1.4% of the $511,746,327 collected in premiums from their customers. My share turned out to be a whopping $22.80.

So here’s where the concerns begin.

  1. Why didn’t Anthem mail the rebate check in an envelope clearly marked ANTHEM? I doubt if even one percent of Anthem customers know Anthem’s parent company is Healthy Alliance Life Insurance of Cincinnatti, Ohio.

  2. Why didn’t Anthem just deduct that $22.80 from my next monthly premium being automatically charged to my credit card so I don’t have to cash a separate check? I am sure all individual insurance providers have to establish an auto-pay arrangement via checking or credit card for monthly premiums. Make the adjustment in a channel you already use monthly that is automated.

Could it be that the actual letter of the law within the ACA is that if administrative expenses exceed 20% of premiums, the insurer must “send a check” for any excess back to customers? Note that “send a check” is logically distinct from “actually return the money.” If the insurer knows a certain type of envelope and notices on the external envelope has a likely “open” rate of only 10%, that insurer would have an incentive to send checks via US mail in the hopes that 90% will be thrown away without getting cashed. The insurance company can say they “complied” with ACA by sending refund checks knowing full well 90% will go uncashed, leaving 90% of the overage in the insurance company’s pocket.

In this case, 1.4 percent of revenues would be $7,64,448. If 90% of customers overlook this letter and pitch it, Anthem is retaining nearly $6.4 million dollars they were supposedly required to refund to customers. This is the same reason why manufacturers love mail-in rebates. They give the customer the illusion of saving money but the customer has to make an effort to mail in the rebate request then they have to wait (often months) for the rebate to be sent then they have to remember to deposit the check. That’s a lot of ifs. And if any if falls through, the business keeps their money.

WTH

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I received a couple of those checks, back when I was buying coverage from United Health.

Why would they camouflage what it was? As you suspect, probably hoping the check would never be cashed. Probably twenty years ago, my aunt received a settlement form AT&T, from some suit alleging T was overcharging for it’s “Linebacker” service, if I recall correctly. Was it a bill credit? Nope. A Check? Nope. It was a couple prepaid AT&T calling cards. She never used them, due to the complexity of using them, vs picking up the phone and dialing, which was probably T’s plan.

Steve

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Just a guess, the loss ratio applies to Healthy Alliance and not to their subsidiary Anthem. Thus, everyone, Anthem customers as well as the customers of other subsidiaries received their check from Healthy Alliance. It is possible that the loss ratio is an aggregate of ALL of Healthy Alliance customers and not just Anthem - thus the check comes from the parent company.

Again, just a guess.

Because as to which you allude, the law requires that it be "rebated’ (no a check, just rebated which could come via an ACH I guess). Reducing your future bill isn’t a rebate.

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Keeping the money would run afoul of most state’s escheat (or unclaimed property) laws. Uncashed checks are a typical example of the purpose of those laws.

When a business is holding property that belongs to someone else, and that other party fails to claim their property, the business must send the property to the state. The state then attempts to contact the owner to return the property.

Does this work correctly every time? Probably not. But insurance companies are the type of business that has a big target on their back for enforcement. They make lots of long term promises and their customers often fail to keep the company informed of their whereabouts.

So it’s pretty unlikely they’re trying to keep those insurance refunds.

—Peter

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