Health Insurance Companies To Pay Out More Than $1 Billion In Rebates To Customers: Reports

Health insurance companies will pay out more than $1 billion in rebates to consumers this year under a provision of the health care reform law.

Want some cash back from your health insurance company? There's a good chance your or your employer might be getting some because of health care reform.

That's because health insurance companies will have to pay out more than $1 billion in rebates to customers this year for spending too little of the premiums they receive on medical care, according to two new reports.

The rebates will total $1.3 billion this year and almost half will go to job-based health insurance plans, according to the Henry J. Kaiser Family Foundation. Individual rebates will range from $1 to $517, depending on the type of insurance plan, how much the company spent on medical care and where the customers live, the report says. Insurance companies can issue rebate checks or deduct the money from future bills, but employers who provide health benefits to workers will often pocket the money, rather than the employees, the report says.

The health reform law requires health insurance companies to spend 80 percent to 85 percent of the premiums customers pay on their actual medical care, rather than administrative overhead, other expenses or profits. Taxes and regulatory costs aren't included, according to the Kaiser Family Foundation.

Congress and Obama added the rebate requirement as a means of ensuring insurance customers would get their money's worth, but the rule doesn't apply to the so-called self-insured plans used by many large employers that pay medical bills directly and hire health insurance companies to administer benefits.

In the health insurance industry, the proportion of premiums they spend on medical care is known as the "medical loss ratio" and is considered a measure of a company's efficiency and future profitability.

"The rebates provided under the Medical Loss Ratio provision, while not particularly large in many instances, are among the more tangible effects of the ACA felt by consumers until the major provisions of the health reform law go into effect in 2014," the Kaiser Family Foundation report says. Other parts of the health care reform law, such as federal oversight of proposed health insurance premium increases, have probably kept prices down and saved customers money, the report says.

Goldman Sachs projects the rebates will be slightly higher than estimated by the Kaiser Family Foundation, Bloomberg News reports. According to the investment bank, health insurance companies will pay out $1.4 billion in rebates this year with $850 million coming from eight big for-profit companies and $250 million from nonprofit Blue Cross and Blue Shield plans, Bloomberg News reports.

Thirty-one percent of people who buy health insurance directly are likely to receive rebates that will average $127, the Kaiser Family Foundation reports. In Texas, the state with the highest rate of uninsured people in the United States, 92 percent of these customers will be due an average rebate for $178.

That's not to say all consumers will be getting rebates, reports Kaiser Health News, which is affiliated with the foundation that issued the report. Federal regulators granted exemptions from this rule to Georgia, Iowa, Kentucky, Maine, Nevada and New Hampshire, which convinced the Obama administration that the insurers in their states wouldn't be able to meet the 80 percent to 85 percent threshold and would cease offering plans to their residents. The Kaiser Family Foundation report doesn't include California because the data weren't available.

The Supreme Court heard arguments last month in a lawsuit challenging the constitutionality of the health care reform law. A ruling is expected by the end of June. The high court could vote to overturn the entire law or parts of it, such as the individual mandate that most Americans obtain some form of health coverage.

Photo by Flickr user Brooks Elliott

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Comments

[gaydood]

07:33 AM on 04/30/2012

this should be on the front page

[chaparellii]

03:32 PM on 04/27/2012

Wow, an actual consumer protection that impacts consumers. tell your friends....Obamacares! In 2014 when it will be illegal to arbitrarilly raise rates this will absolutley improve healthcare quality and efficiency. Healthcare companies will find a way to use the money towards better care to avoid the rebates.

[mj1247]

10:02 AM on 04/27/2012

why is there profit allowed in health care ? it should be a basic human right...a sick worker is a drag on that persons employer and the country a healthy worker is good for america...why dont republicans understand that...a healthy worker is more productive thus making everyone profit..what is a human life worth?

[VoiceOfReality2012]

11:01 PM on 04/26/2012

We see NOW why the Repubs bosses are financing them in the hopes of repealing it. Thats $1.3 BILLION that would have gone STRAIGHT INTO those fatcats pockets and DID GO THERE before the presidents reform.

[dtallwalk]

09:28 PM on 04/26/2012

In the next 2 years the insurance co will be jacking up the rates at a faster rate. When the ACA is implemented they will be breaking the law if they raze the rates. But the curve in all this is the insurance co will have to pay 80-85% in care costs and the rest they get to keep. So the money they collect will drop to the floor for a time. And that will take out some of there lobbing power
So getting as much as They can now is in their best interests.

[LVNVprog]

04:35 PM on 04/26/2012

Just let everyone Purchase in Medicare at Cost PLUS 5%, Remove ALL Insurance Company Regulations and let the competition Begin! Public Option PLUS Private Competition. Medicare has 3-4% in overhead, lets see if the Insurance companies can deliver a better product at a 9% Profit Margin. Republicans should be all for Competition - NOT!

[satyrday]

03:21 PM on 04/26/2012

When Clinton proposed health care reform, the 'medical loss ratio' was 95%. Medicare currently pays out 97% of the dollars they collect.

The fact that private insurance can't do it for 80 to 85% is pathetic, and one HUGE reason why health care is failing in America.

It's blatant greed and profiteering, at the expense of American health and lives.

[hicksticks2001]

03:20 PM on 04/26/2012

"Dear Insurer, we have enclosed your $127 reimbursement check per ObamaCare. We would also like to take this time to inform you that due to new regulations by ObamCare, your insurance premiums will be going up $700 next year. Please enjoy your $127 reimbursement."

-Warm Wishes, Your Insurance Provider

[SaveTheMarshMouse]

05:47 PM on 07/11/2012

you lie - you are a freeloading republican who doesn't bother paying for insurance - you just assume we are all going to keep paying for you...sorry bagger....start paying your own way...get some health insurance -

[sheila]

01:13 PM on 04/26/2012

Is there a penalty? If I underpay my taxes, I don't get to just hang onto the money then shrug and return it if I get caught. I pay penalties and interest. Please tell me that is built into this model, otherwise there is no disincentive to overcharging!

[RichardU]

01:04 PM on 04/26/2012

Next year, insurance companies will realize they could have made $260 million more if they would have just spent an extra $1.04 billion on medical care. It's a crazy system that rewards companies with higher profits if they can drive costs up instead of down.

[Girl3434]

05:42 PM on 04/26/2012

It may not be perfect, but I refer this to the companies being able to keep all the money they want without spending any of it on healthcare. At least now there is SOME accountability.

[Kathleen M Baudino]

08:39 PM on 06/28/2012

You're right, and in order to make more, they have to pay more on medical care, therefore they'd have to stop rejecting claims. It will be very interesting to see how this plays out.