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Small businessman in Hampton plows ACA health rebate back into workers' dental plan

Health InsuranceBusinessInsuranceSmall BusinessesAffordable Care Act (Obamacare)

HAMPTON – Jack Ralston said a rebate check his small aerospace business received last month as part of the Affordable Care Act, while modest, should make his company a little more competitive among industry rivals.

Ralston, president of Bihrle Applied Research, said to recruit talented employees he has to offer health benefits comparable to the Lockheed Martins and Boeings of the world.

"We're competing with companies across the globe, and Europeans," Ralston said. Rivals in Europe, he noted, pay considerably more in taxes but their health care costs are zero.

Though he says the company's health plan is on par with the competition, its dental coverage could be better.

Under a provision in the federal health care law small businesses like Bihrle received rebates if their insurers spent less than 80 percent of what they collected in premiums on health care claims

The provision, which caps administrative costs and profits in the the insurance industry, is referred to as the medical loss ratio or 80-20 rule.

Ralston said Bihrle, where 20 employees are on a UnitedHealthcare plan, got a rebate check in August for about $4,700, or $235 a worker.

That doesn't dent the company's overall health costs, which rose to $235,000 last year. But Bihrle said it was enough to improve dental coverage, an area where he felt his company had fallen short in the past.

"I could have distributed it to the employees or stuck it in the company checking account, but there's been people wanting to know if we could improve the dental coverage, and I agreed with them," Ralston said.

"Our previous dental coverage was only for checkups and fillings. Any other major stuff, like root canals and crowns, was not covered," he said. "So we were able to go ahead and cover some of the more major stuff."

Health insurance companies returned $1.1 billion in premiums through rebates, either in checks directly to people with individual insurance plans, or to companies, according to the Department of Health and Human Services.

Companies have up to three months to use the money and considerable leeway in how they spend it.

Ralston could have given his employees a "premium holiday," using the money to pay premiums and putting more than $200 in their pockets. Or he could have spent it all on a wellness program to help workers lose weight or quit smoking, for example.

In Virginia, 62 percent of people on individual plans received rebates, with payouts averaging $27, according to a study by the Kaiser Family Foundation.

About half of employees in the state insured through small group plans – policies that insure up to 50 workers — should receive some health benefit as a result of the rebates, the Kaiser study said. The average payout per worker received by those small business was estimated to $109.

Policies for companies insuring more than 50 workers were more likely to be in compliance with the medical loss ratio rule, according to the study. For so-called large group market plans, no more than 15 percent of premiums is supposed to be spent on administrative costs and overhead.

Kaiser estimated that 11 percent of workers in such plans should benefit as a result of their company receiving a rebate.

Ralston said that while the rebate is nice, the bigger picture for his company is overall health costs.

The company has faced health plan increases between 6 percent and 16 percent annually, he said, and its total bill has increased more than four-fold in the last decade and a half.

"It's just astonishing the rate of increase we've had over the last 15 years or so," he said. "If you continue to project that curve in to the future, that's got me concerned," he said.

"I either have to throw more on the employees, or cut back our program, because that's our biggest expense outside of salaries."

He said he hopes the new provision places pressure on insurers to contain costs, but whether the provision achieves that goal is still an open question.

Insurers have called the cap on administrative costs arbitrary and pointed out that it doesn't affect what patients are charged for medical procedures, a driver behind increasingly costly insurance policies.

Anthem Blue Cross Blue Shield paid rebates for two of its small group and individual insurance lines, but spokesman Scott Golden said that the checks came out to "less than half a percent on the premiums we collected."

So when it comes to projecting what it would pay in claims, Golden said, "we guessed pretty well."

According to the Department of Health and Human Services website, Anthem's average rebate for individual plan policyholders was $13. For small employers the average amount was $169 per enrollee.

Golden said that regardless of the medical loss ratio the goal remains the same for Anthem.

"We're trying to get the best benefit plans out to our customers while also trying to control costs, and everybody has to work together to curb these rising cost."

Copyright © 2014, The Baltimore Sun
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