Posted: April 26, 2012
Health insurers that haven't spent the required share of premiums on health care will be sending rebate checks to employers and consumers. All told, an estimated $1.3 billion is expected to be returned to customers this summer.
Come summer, mailboxes of 1 in 3 buyers of individual health insurance buyers could get rebate checks. JS Callahan/tropicalpix
If you buy your own health insurance, there's nearly a 1 in 3 chance that come this summer you'll get a nice little surprise in the mail: money back from your health insurance company.
At least that's the prediction from an analysis by the Kaiser Family Foundation.
The checks are rebates. And they're the result of a provision of the 2010 Affordable Care Act (assuming it doesn't get struck down before then by the Supreme Court).
It's called the medical loss ratio." In English, that means health insurers have to spend either 80 or 85 cents of each dollar they collect in premiums on actual medical care. That leaves, at most, 15 or 20 cents for administrative costs, marketing and profit.
Plans that fail to meet that standard have to return the excess to policyholders by August of the following year. The MLR rules first went into effect for calendar 2011, so the first rebates are due this summer.
When the Department of Health and Human Services issued rules for all this last November, it predicted that rebates would amount to as much as $1.4 billion. Not a bad estimate.
The Kaiser analysis, based on preliminary data from the insurance companies themselves, estimates total rebates to be around $1.3 billion. A separate survey by Goldman Sachs, reported by Bloomberg News, pegged the total at $1.2 billion.
According to Kaiser, 3.4 million people in the individual market are expected to get a rebate check, which will average $127 each. That's about 31 percent of all people who purchase their own policies. Consumers in Texas, Oklahoma, and South Carolina are most likely to get rebates.
In the small group market, about $377 million in rebates are expected to go out covering just under five million enrollees, or about 28 percent of that market. Those rebates are projected to average $76 per enrollee.
The large group market includes the smallest percentage of enrollees who can expect to share in the rebate rush — just 19 percent. But because most people are in large group plans, they account for the most money that will be rebated to the most enrollees. An estimated $541 million covering 7.5 million people. Rebates will go to the employers that purchase the policies, but they're to share them with workers. They should average $72 per enrollee.
Analysts for both the Kaiser Family Foundation (which is not affiliated with the insurance plan Kaiser Permanente) and Goldman Sachs said one reason the rebates are a bit smaller than originally projected is that insurers held down premiums to make sure they didn't have to refund money. That, of course, was the intent of the including the provision in the law in the first place.
Still, insurance industry consultant Robert Laszewski isn't impressed. "Does a $200 rebate on a $13,000 premium make health insurance any more affordable?" he asked in a blog post.
And it didn't stop Republicans from using the news to hammer on the fact that premiums have continued to climb in spite of then-candidate Obama's vow to reduce them by as much as $2,500. Obama campaign chief David Axelrod tweeted the news of the rebates earlier today with a link to a report from The Wall Street Journal no less. And the Republican National Committee tweeted in response: "Obama promised $2,500 premium savings, just another broken promise?"
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