Friday, April 27, 2012

Health Insurance Rebates Under Health Reform Law Estimated To Total $1.3 Billion In 2012

Consumers and businesses are expected to receive an estimated $1.3 billion by this August in rebates from health insurers who spent more on administrative expenses and profits than allowed by the patient Protection and Affordable Care Act (ACA), according to a new analysis from the Kaiser Family Foundation of the latest estimates provided by insurers to state insurance commissioners.

Beginning in 2011, the ACA requires insurance plans to pay out a minimum percentage of premium dollars towards health care expenses and quality improvement activities, limiting the amount spent on administrative and marketing costs and profit. Under the law, large group plans are required to spend at least 85 percent of premium dollars on health care and quality improvement, while small group plans must spend at least 80 percent. These ratios are known as the medical loss ratio (MLR). If an insurer fails to meet the MLR within a market segment in a state, they must issue a refund to consumers and employers.

The rebates include $541 million in the large employer market, $377 million in the small business market, and $426 million for those buying insurance on their own. Rebates in the group market generally will be provided to employers, and in some cases be passed on to employees as well.

Rebates are expected to go to almost 31 percent of consumers in the individual market, Kaiser found. Among employers, 28 percent of the small group market and 19 percent of the large group market is projected to receive rebates. The share of consumers in the individual insurance market expected to receive rebates ranges from near zero in several states to as high as 86 percent in Oklahoma and 92 percent in Texas. When averaged over all enrollees in the small and large group markets, on an annualized basis per enrolled rebates paid to employers and workers are expected to be $21 and $14, respectively.

“This study shows that asking insurance companies to put more of their premium dollar towards patient care rather than administration and profits is not only popular but also effective,” said Drew Altman, president and chief executive officer (CEO) of Kaiser. “There are tangible benefits for consumers and employers.”

The largest rebates overall are projected to go to consumers and businesses in Texas($186 million) and Florida ($149 million); Hawaii is the only state where no insurer is expected to issue a rebate. Consumers receiving rebates in the individual market are projected to receive $127 on average, with amounts varying significantly by insurer and state. The average rebates for individual purchasers expected to receive them range from just a few dollars in some states to as much as an average of $305 in Alaska, $294 in Maryland, $243 in Pennsylvania, $241 in Idaho, and $236 in Mississippi.

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For a comprehensive analysis of the ACA, and additional information on health reform and other developments in employee benefits, just click here.


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