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Health reform law to yield $1.3 billion in insurance rebates

Published April 26, 2012 9:52 pm

Report • New regs may have mitigated some rate hikes.
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Washington • U.S. consumers and employers will receive about $1.3 billion in rebates from insurance companies this year, according to a new study quantifying a key early benefit of the health care law that President Barack Obama signed in 2010.

That will translate to anywhere between a few dollars and more than $150 for nearly 16 million consumers nationwide, the report by the nonprofit Kaiser Family Foundation found.

Obama's health care law requires insurers to spend a minimum portion of customers' premiums on medical care. The provision was championed by consumer groups concerned that companies were hiking premiums to pay for executive salaries, shareholder dividends and other expenses unrelated to customers' care.

Starting last year, if insurers fail to meet these targets, known as medical loss ratios, they are required to pay rebates the following year. In some cases, the rebates will go only to employers, which may pass them on to employees as rebate checks.

The Kaiser study, released Thursday, analyzed rate documents filed with state regulators nationwide. The Obama administration, which is still laboring to persuade a wary public to support the landmark law, was quick to point to the study and remind the public about the new legal requirements.

Kaiser Chief Executive Drew Altman said the research shows the promise of the law. "Greater regulatory scrutiny of private insurance is improving value and helping to get excess costs out of the system," he said.

The report's authors also noted that the new requirements probably mitigated some rate hikes by pushing insurers to seek smaller increases. Millions of consumers still face steeply rising premiums, however.

The cost of employer-provided family health plans jumped 9 percent last year to more than $15,000, a cost shared by employers and employees, according to an annual survey released in September by the Kaiser foundation and the Health Research & Educational Trust.

There is substantial evidence that premium hikes are being driven in large part by rising medical costs.

"The new medical loss-ratio requirement ... does nothing to address the real driver of premium increases," said Robert Zirkelbach, a spokesman for America's Health Insurance Plans, the industry's lobbying arm in Washington.

Insurance companies have vigorously fought the new medical loss-ratio requirements.

The Kaiser study found 486 health plans nationwide that will be required to pay rebates, with the largest number in the so-called individual market serving people who do not get health coverage through work. The report did not identify individual insurers.

Nearly a third of all consumers in this market, which is widely seen as more problem-plagued than the market serving employers, will be eligible for a rebate.

About a quarter of consumers in the small group insurance market and less than a fifth of consumers in the large group market qualified for rebates. Employers that self-insure are not subject to the new rebate requirement.

The average rebate for enrollees in all individual plans is $127 per person.

Average rebates are smaller in the employer group insurance plans, with the small group market averaging $76 per member and the large group market averaging $72.

The study also found wide variation in states, with insurers that sell individual health plans in some states such as Alaska, Maryland and Pennsylvania required to provide average rebates of about $300.

In Hawaii and Maine, by contrast, no insurers in the individual market will have to provide rebates.

Data were not available for California because health maintenance organizations in the state are not subject to the same reporting requirements.