Thanks To Obamacare, Major Insurers Have To Give Back $36 Million To California Small Businesses

On Tuesday, Golden State small businesses and their employees got some great news: two of the state’s largest insurers will have to give them over $36 million in insurance rebates because of an Obamacare consumer protection.

The health law forces insurers to spend at least 80 percent of the premiums they charge on paying for actual medical services, rather than administrative overhead or profits. That means more money for ordinary consumers — and less for profitable insurance companies.

The so-called “80/20 rule” put $1.5 billion back into Americans’ pockets in 2011 alone. The average rebate was $151 per family across all insurance markets, and in states where insurers blatantly gouged prices, average rebates topped a whopping $500 per family.

Now, the benefits for Californians with small business health plans are beginning to materialize. Blue Shield of California will be forced to pay back $24.5 million in rebates. Anthem Blue Cross will have to pay back another $12 million.


While cheering the latest numbers as a victory for California small businesses and their employees, consumer advocates argue that the insurance industry should try harder to proactively lower costs for companies and individuals.

“Health insurers should work to cut upfront premiums rather than reimburse consumers afterward,” said Jon Fox, consumer advocate at the California Public Interest Research Group Education Fund, in an interview with the Los Angeles Times. “Millions of dollars in rebates are a clear sign that health insurers are overcharging consumers.”

Large insurers like Anthem Blue Cross have tried their best to circumvent Obamacare protections like the 80/20 rule by threatening outlandish premium rate hikes. The health law requires state insurance regulators to review any premium hike request above 10 percent, but it leaves the decision of whether or not reject those rates with the states. Although 37 states can negotiate or reject insurers’ rates, some large-population states — including California — can’t.

Still, any rate hikes imposed by insurers will be held accountable to the 80/20 rule. Financial gimmicks may give insurers a short turn profit — but it’s one they’ll have to give right back to consumers.

Insurance companies aren’t the only ones who aren’t huge fans of this consumer protection. Last September, the Republican-led House Energy and Commerce Committee’s Health Subcommittee passed H.R. 1206, which would have repealed the 80/20 rule and amounted to a massive premium hike for over 13 million Americans. The Congressional Budget Office (CBO) estimated that the bill would also increase the federal deficit by $531 million in the next four years.