medical costs), the difference is to be refunded to
all policyholders in that group, proportionately.
Many employers do not appreciate that they are entitled to this protection. Thus, in the first few years
of the health care law, many received refunds in the
mail with no understanding as to why.
Since then, the insurance companies have gotten
smarter. At this point, most have avoided further
refunds by meeting their medical loss ratios every
year — or at least claiming to do so.
Think about it — one easy way for insurance companies to meet their medical loss ratio requirements is
simply by increasing their payments of claims. That
way, they can keep their premiums the same, or even
increase them. For fully insured plans, the ability to
increase claim payments, and the maintenance of all
records about those payments, lies exclusively within
insurance company control. There is no disadvantage for insurance companies in increasing their
claim payments; they simply pass through all the
increased costs to the employers at renewal time.
Next, think about this — as a legal matter, insurance
companies actually benefit from overpaying claims,
then recovering the overpayment through a fraud
recovery action. The overpayment itself increases the
numerator of the claim payments; the fraud recovery
later provides a credit to that numerator — after the
medical loss ratio has been calculated.
This double benefit stands in stark contrast to an
insurance company’s fraud prevention activities.
When insurance companies utilize their alreadyexisting mechanisms for detecting and avoiding
fraudulent claims from the outset, they do not get a
credit toward their medical loss ratio for either the
initial overpayment or the secondary recoupment.
Although they end up in the same place financially
in terms of the claim payment, they have missed
the opportunity to inflate the numerator of the
medical loss ratio calculation — and thereby to
avoid owing policyholders a refund.
Against this backdrop, it should not come as a
surprise that there has been an increase recently
in insurance company lawsuits seeking reimbursement of their own overpayments to providers.
Or — that some insurance companies have been
overt in acknowledging that the medical loss ratio
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VOLUME 12 | ISSUE 1
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