The health care reform law requires insurers to spend a minimum percentage of premiums to pay for health care services or activities to improve quality health care. For small group and individual insurance products, insurers must spend at least 80 percent on health care services and activities to improve quality meaning no more than 20 percent can be spent on administrative costs such as salaries, facilities and other business expenses. In the large group market, the ratio is 85 percent and 15 percent. Insurers who don't meet these ratios are required to pay the difference back via a rebate.
Am I going to receive a rebate from Blue Cross and Blue Shield of Kansas?
No. Because Blue Cross and Blue Shield of Kansas operated within the medical loss ratio required by the Patient Protection and Affordable Care Act for 2011 we were not required to pay rebates to our policyholders or members in 2012.
I have seen some news reports or listings that show Blue Cross and Blue Shield is required to pay rebates. Is this information wrong?
There are 38 independent Blue Cross and Blue Shield companies. Because each is a separate company, each was required to report its own medical loss ratios for 2011. Some of the other Blues paid rebates to members in their respective service areas while others, like Blue Cross and Blue Shield of Kansas, met the ratios required by law and did not pay rebates. Any confusion in Kansas has come from the fact that Blue Cross and Blue Shield of Kansas City – a completely separate company from ours that, in Kansas, only operates in Johnson and Wyandotte counties – paid rebates. Blue Cross and Blue Shield of Kansas – which operates in all Kansas counties except Johnson and Wyandotte – met the ratios and did not issue rebates in 2012.
Where can I find the medical loss ratios for Blue Cross and Blue Shield of Kansas and other insurers in 2011?
We were required to report our MLR for each line of business (individual, small group and large group) to the Kansas Insurance Department and the U.S. Department of Health and Human Services. This information for Blue Cross and Blue Shield of Kansas, as well as other insurers operating in Kansas, is available at www.healthcare.gov.
Specifically, what were the medical loss ratios for Blue Cross and Blue Shield of Kansas in 2011?
Based on the information that we submitted to the Kansas Insurance Department and the U.S. Department of Health and Human Services, our MLR ratios by line of business for 2011 were:
Individual business — 88.4%
Small group business — 86.6%
Large group business — 93%
In many of your advertisements, Blue Cross and Blue Shield of Kansas claims to spend about 92 cents of a premium dollar on claims and about 8 cents on administrative costs. Why are your reported MLR numbers different?
When we share one figure to explain how a member's premium dollar is spent, it is a general figure based on all lines of business combined. The law requires us to use a specific formula to calculate medical loss ratios for each line of business (individual, small group and large group) by which to determine compliance with the Patient Protection and Affordable Care Act. The formula allows insurers to take certain credits and is specific about what is included and how it is calculated. When we calculate more general figures for our administrative costs and claims expense, the formula we use is more simplified.