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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