Thanks to a provision of the Affordable Care Act, 16 million consumers and businesses are expected to receive about $1.3 billion in rebates from health insurance companies, according to the Kaiser Family Foundation. The medical loss ratio rule requires insurers to spend at least 80 to 85 percent of premiums on patient care; if not, then the companies owe rebates to their customers. As Health and Human Services Secretary Kathleen Sebelius explains, “We want to know that most of what we are paying for is for health care, not advertising, executive bonuses or overhead. It’s pretty simple: we want to get a good value for our premium dollars.”
The Kaiser estimates show that rebates add up to $541 million in the large employer market, $377 million in the small business market, and $426 million for those buying insurance on their own. Roughly one-third of people nationally who bought individual insurance plans can expect a rebate, but the percent of consumers expecting rebates ranges from almost zero in some states to 86 percent in Oklahoma and 92 percent 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.
Insurance brokers unsuccessfully tried to block this regulation, and Florida officials asked the federal government for less stringent requirements that would have likely reduced the rebate amounts in that state. But if this rule had gone into place in 2010, 15 million people would have seen $2 billion in rebates that year.