Kaiser Analysis: Estimated Health Insurance Rebates Under the Health Reform Law Total $1.3 Billion in 2012
April 26, 2012
Rebates Expected to Vary Significantly by State
MENLO PARK, Calif. – Consumers and businesses are expected to receive an estimated $1.3 billion by this August in rebates from health insurers who spent more on administrative expenses and profits than allowed by the Affordable Care Act (ACA), finds a new analysis from the Kaiser Family Foundation of the latest estimates provided by insurers to state insurance commissioners.
The rebates include $541 million in the large employer market, $377 million in the small business market, and $426 million for those buying insurance on their own. Rebates in the group market will generally be provided to employers, and in some cases be passed on to employees as well.
Rebates are expected to go to almost one-third (31%) of consumers in the individual market. Among employers, about one-quarter (28%) of the small group market and 19% of the large group market is projected to receive rebates. The share of consumers in the individual insurance market expected to receive rebates ranges from near zero in several states to as high as 86% in Oklahoma and 92% 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. “There are tangible benefits for consumers and employers.”
The largest rebates overall are projected to go to consumers and businesses in Texas (total $186 million) and Florida ($149 million); Hawaii is the only state where no insurer is expected to issue a rebate.Consumers receiving rebates in the individual market are projected to receive $127 on average, with amounts varying significantly by insurer and state. The average rebates for individual purchasers expected to receive them range from just a few dollars in some states to as much as an average of $305 in Alaska, $294 in Maryland, $243 in Pennsylvania, $241 in Idaho, and $236 in Mississippi.
Beginning in 2011, the ACA requires insurance plans to pay out a minimum percentage of premium dollars towards health care expenses and quality improvement activities, limiting the amount spent on administrative and marketing costs and profit. Under the law, large group plans are required to spend at least 85 percent of premium dollars on health care and quality improvement, while small group plans must spend at least 80 percent. These ratios are known as the Medical Loss Ratio (MLR). If an insurer fails to meet the MLR within a market segment in a state, they must issue a refund to consumers and employers.
The analysis includes a data table with state-by-state information on the total dollar amount of projected rebates, the number of people enrolled in plans expected to provide rebates, the number of plans paying rebates, the average rebate across the entire market, and the average rebate amount for those receiving them. The data are available for the individual, small group and large group markets.
The data for the insurance rebates are based on estimates provided by insurers in filings to the National Association of Insurance Commissioners in the 2011 Supplemental Health Care Exhibit. The source of the data was the Health Coverage Portal, a market database maintained by Mark Farrah Associates, which includes information from the NAIC. Actual rebates will be based on reports insurers submit to the federal government later this year.Learn more about the MLR, how it is calculated, and how consumer rebates will be issued in a fact sheet from the Foundation.
The Kaiser Family Foundation, a leader in health policy analysis, health journalism and communication, is dedicated to filling the need for trusted, independent information on the major health issues facing our nation and its people. The Foundation is a non-profit private operating foundation, based in Menlo Park, California.
Publish Date: 2012-04-26
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