Health insurance premium rebates poised to begin

Paula Duffy's picture

Rebates are on their way to health insurance customers and the total could exceed $1 billion, but some or all could be wiped out with rate hikes.

Health insurance carriers are mandated to rebate a portion of premiums paid by consumers and small businesses if they fail to spend at least 80 percent of the premiums they collect on medical care and quality improvements. In the case of a large employer, the threshold rises to 85%.

It is one of the requirements under the Affordable Care Act and to some consumers it might be the first or the most tangible benefit they have seen since passage of the law. Estimates of the nation-wide total range from $1-1.3 billion.

That number could likely change when the rebates for California are added into the equation. The state has yet to receive the official information from the insurers who do business in the state.

Consumers didn't have more than a moment to exult before the insurance companies warned that they will more than likely wipe out the rebate with rate hikes.

ABC News reported on the comments of an industry spokesman. "The net of all the requirements will be an increase in costs for consumers," said Robert Zirkelbach, spokesman for America's Health Insurance Plans.

He explained that companies do the best they can to price premiums that reflect the actual cost of medical care but, "Given that health care costs are inherently unpredictable, it's not surprising that some plans will be paying rebates to policyholders in certain markets."

Applauding the rebates is Senator Jay Rockefeller ( D-W.Va) "Millions are benefiting because health insurance companies are spending less money on executive salaries and administrative costs, and more on patient care."

Consumers who get their health care coverage from an employer will not see any direct effect of the rebates as the money will go back to the purchaser of the plan while companies who self-insure their employees are not entitled to any portion of the rebates.

A report in the Wall Street Journal contained an analysis from the Kaiser Family Foundation, considered a non-partisan group. Its estimate of a $1.3 billion total in rebates is expected to be divided in this way: $426 million will go to people who bought their own health plans; $541 million will go to large employers and $377 million to small businesses.

Kaiser projects that around 31% of individual policyholders, or around 3.4 million people, are expected to get rebates. The foundation's researchers estimated that the national average will be $127 each.

The rebates are not expected to go in the mail until late summer 2012 after the insurance companies report the total amount to the federal government.

Image: Wikimedia Commons ---- President Obama signing the Affordable Care Act

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