Rebates Coming, Courtesy of Health Care Reform

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The Affordable Care Act requires insurance companies to spend at least 85 percent of the money they take in on patient care. If your insurance company didn't, you might have some money heading your way this summer.

According to the Kaiser Family Foundation, there’s going to be a strange event taking place this summer: rather than sending money to your insurance company, they might be sending some to you.

Below is an edited version of a recent news release. You can check out the full release and get more information here.

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 Affordable Care Act (ACA), finds a new analysis from the Kaiser Family Foundation of the latest estimates provided by insurers to state insurance commissioners.

Rebates are expected to go to almost one-third (31%) of consumers in the individual market. 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% in Oklahoma and 92% in Texas.

“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 Kaiser President and CEO Drew Altman. “There are tangible benefits for consumers and employers.”

The largest rebates overall are projected to go to consumers and businesses in Texas (total $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.

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.

If your employer pays for your health insurance, they’ll be getting the check. If you’re paying part of the cost, they may share the money with you, use it reduce future premiums, or just keep it.

Stacy Johnson

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