For once, there is some good news from health insurers! In the next few months, health plans will be paying out an expected $1.3 billion in rebates to consumers.
You can thank the health reform law, and new rules it created involving the Medical Loss Ratio (MLR). According to the rules, health insurance companies are now required to spend a certain percentage of premium dollars on health care (as opposed to administration, marketing or profit). For large group plans, the MLR is 85% and for small group plans it’s 80%. And those plans that didn’t meet their MLR will have to give some of the premiums they collected back to its members.
A newly released study predicts that insurers will owe $541 million to large employers, $377 million to small employers, and $426 to individual consumers. (Note the study’s sponsor, the Kaiser Family Foundation, is independent from the Kaiser Permanente health plan).
Who Gets a Rebate
Only people whose plan exceeded its MLR will get a rebate. In some states, such as Vermont Rhode Island, and Hawaii, very few health plans broke the rules, so less than 1% of consumers will be owed a rebate. In other states, such as Oklahoma and Texas, close to 90% of consumers are expected to get some money back. But overall, one in three consumers in the individual market, and one in four in the employer/group market, will get a rebate.
How Much are the Rebates?
The amount of each rebate depends on how much your health plan overspent on administration and profit. For large and small employers, they’ll average $76 and $72 per employee, respectively. But for individuals, the highest rebates are expected to average $305 in Alaska and $294 in Maryland. Find your state.
When and How to Expect the Rebate
The rebates are due to consumers by August of this year. Individual consumers can expect a check in the mail but for employer/group plans, the rebate will be paid to your employer. In most situations, the employer must directly pass the savings on to employees, depending on the specific type of group (such as a private employer, government, or church).
Another exception? If your rebate is less than $5 as an individual, or $20 per person for a group plan, the insurer is allowed to provide it in the form of a discount on future premiums.
Enjoy the rebates while you can. They are not expected to be as large in following years, as insurance companies adjust to the rules. For more information on the MLR and other exceptions for plans: http://www.healthcare.gov/news/factsheets/2010/11/medical-loss-ratio.html