Health Insurers Rebate $73.9 Million (Mostly to Employers) after Spending Too Little on Care

Thursday, August 02, 2012

When Mitt Romney was in Israel last week, he praised that country’s national health care system and its cost controls (while recommending we not try that sort of thing here). The United States spends about 18% of GDP on health care, while Israel spends less than half that.

President Barack Obama’s Affordable Care Act attempts to rein in medical administrative costs partially by penalizing insurance companies that spend less than 80% of premiums on actual care. Big companies have to reach 85%. If they fall short, companies must send rebates to their customers.

In California, the average family gets $65 this year, as 2 million residents divvy up $73.9 million. Some people have already been notified of their cut, but not a lot of individuals are going to see the money. People who are self-insured with a company that owes money will get a check. But employers who are a conduit for insurance to workers have the option of applying the refund toward future premiums instead of distributing checks.

Medicare and Medicaid are exempt. The Obama administration estimates that of the 75 million people in health plans governed by the rule, only 17% will get rebates.   

Nationwide, insurance companies are paying out $1.1 billion in rebates, an average of $151 per family. The highest family payout goes to Vermont ($807), followed by Alaska ($622) and Alabama ($518). Rhode Island and New Mexico insurers met the guidelines and will pay nothing.

Seven states were having such a difficult problem with the 80/20 rule that the federal government gave them a reprieve. Georgia, Iowa, Kentucky, Maine, Nevada, New Hampshire and North Carolina all get to pay a bit more overhead than the others. Eight other states sought, but were denied, the waiver.

–Ken Broder


To Learn More:

California Lays out Health Insurance Rebates (by Claudia Buck, Sacramento Bee)

Health Insurers Owe Nearly $74 Million in Rebates to Californians (by Chad Terhune, Los Angeles Times)

Insurance Rebates Seen as Selling Point for Health Law (by Abby Goodnough, New York Times)

Romney Lauds Israeli Health Care System (by Matt Viser, Boston Globe)

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