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Health law rebates due from Mass. insurers

Massachusetts health insurance companies will pay $45 million in rebates to health insurance customers and employers after failing last year to devote enough money to claims and quality improvement, according to a study of preliminary filings published Thursday by the Henry J. Kaiser Family Foundation.

Some 38,722 people who are individually insured will get average rebates of $148.61, the foundation estimated. But the bulk of the rebate money will go to to businesses with group health care plans, rather than to individuals, it found. The identities of insurers who must issue rebates are not yet public.

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The rebates are the result of President Obama’s landmark health care law, which requires insurers covering individuals and small businesses to spend at least 80 percent of premiums on delivery of care - handling claims and bettering service - rather than on administration. For large group plans, the minimum is 85 percent. Insurers who fall short of this required “medical loss ratio’’ must pay rebates to the individuals and businesses they insure.

The rate of rebates issued by Massachusetts insurers, especially in the individual and small-group markets, is among the highest in the nation. That is because the medical loss ratio in Massachusetts - 88 percent in 2011 - is even greater than that in the federal law, setting the bar higher for insurers doing business here. That pushes up the amount of rebates owed to customers.

The federal and state requirements, enforced for the first time in 2011, are designed to limit how much money insurers can spend on activities that do not directly benefit their clients.

Rebate checks will arrive by Aug. 1 and should, according to a White House statement citing the Kaiser study, signal to voters that medical loss ratio standards are “just one way the Affordable Care Act is already making a difference.’’

But America’s Health Insurance Plans, the nation’s primary industry group, offered a counter analysis, arguing that the regulations will do more harm than good in the long run.

“It doesn’t do anything about the underlying cause of high insurance premiums, which is high medical costs,’’ said Robert Zirkelbach, the organization’s spokesman. “Some providers might have to leave certain markets because of the requirements.’’

The nationwide Kaiser study was based on preliminary rebate estimates insurance companies submitted to state insurance departments. The estimates were compiled by Mark Farrah Associates, a health care data aggregation firm in Kennebunk, Maine, and the study did not identify the insurers that would issue rebates.

A Kaiser representative said the foundation was not provided the names of insurance companies, and a Farrah representative did not return a phone call seeking the information.

Six Massachusetts health plans in the individual market, eight in the small-group market, and three in the large-group market will pay rebates, according to the study. Final rebate figures for every company will be filed by June 1 and become public.

Blue Cross and Blue Shield of Massachusetts, the state’s largest health insurer, does not expect to be among the companies issuing rebates.

“While this is still preliminary, Blue Cross and Blue Shield of Massachusetts, in no small part because of its commitment to keeping administrative costs down, does not anticipate being required to issue refunds because of failures to meet state or federal requirements,’’ Jay McQuaide, the insurer’s senior vice president of corporate communications, said in an interview.

Other state health insurers contacted by the Globe declined to comment on whether they expect to issue rebates.

Jon Kingsdale, the former executive director of the Commonwealth Health Insurance Connector Authority, said he was suprised to learn Massachusetts insurers would have to return so much money. He said that insurance companies in this state are among the nation’s leaders in devoting money to the people they serve.

Insurers across the country, Kingsdale added, are starting to get the message sent by medical loss ratio standards in the Affordable Care Act.

“I think it’s a blunt tool, but I think there’s already evidence that the law is stimulating health insurance companies to look at their administrative expenses,’’ he said. “It’s putting pressure on them.’’

Callum Borchers can be reached at callum.borchers@globe.com. Follow him on Twitter @callumborchers.
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