Health Insurers to Pay Rebates
May 4, 2012
One of the new requirements brought about by the health care reform law focuses on a figure called the medical loss ratio, which represents the share of premium revenue that goes toward medical expenses. According to the stipulations of the law, a certain percentage (80 percent for individuals and small businesses and 85 percent for large businesses) must be applied directly to health care, says the Wall Street Journal.
Crucially, if a health insurer doesn't spend a large enough proportion on health costs it must give back the difference to customers. This will take the form of rebates that will be issued this year that will total more than $1 billion.
- The nonpartisan Kaiser Family Foundation calculated total rebates at $1.3 billion while analysts from Goldman Sachs put them at $1.2 billion.
- The Goldman analysis found that this year Aetna Inc. will pay out around $177 million in rebates on eligible premium revenues that totaled $11 billion.
- Similarly, UnitedHealth Group Inc. will owe about $307 million on $28.8 billion in eligible premiums, and WellPoint Inc. will pay out around $94 million on $33.2 billion.
The rebates will not be spread evenly among all health care consumers across the country, but will instead be distributed to each insurance provider's respective customers.
- The Kaiser Family Foundation says that around $426 million will go to people who bought their own health plans, $541 million will go to large employers and $377 million to small businesses.
- Furthermore, the Kaiser Family Foundation estimates that 60 percent of employees with workplace coverage were enrolled in self-funded plans in 2011, thereby exempting them from the provision.
- Nevertheless, it estimates that around 31 percent of individual policyholders, or around 3.4 million people, are expected to get rebates.
- Kaiser's researchers estimated that the national average would be $127 each on an annualized basis, though the amounts varied widely.
Source: Anna Wilde Mathews, "Health Insurers to Pay Rebates," Wall Street Journal, April 26, 2012.
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