The money comes from health insurance plans that that failed to meet the Affordable Care Act’s requirement that insurance companies spend at least 80 percent of subscriber premiums on health-care claims and quality improvement initiatives. In a new report, the Obama administration found that 12.8 million Americans will receive rebates this year, with an average value of $151 per household. “The big improvement here is a better value for the premium dollar,” said Mike Hash, interim director of the Center for Consumer Information and Insurance Oversight. “What this standard encourages issuers to do is be prudent in their administrative expenditures, so the bulk of the premium dollar is going to pay for benefits.”
The requirement in the law is known as the “medical loss ratio standard” and impacts both individual and group plans. The amount of the rebate varies by state. Consumers in Vermont’s individual market will see the country’s biggest rebates, averaging $807. In Washington, D.C., 592,234 households will receive rebates averaging $157. The 141,129 Maryland residents receiving rebates will see a higher amount, $340, while in Virginia, 686,738 customers will be rebated an average of $115.
Not all money will flow directly to consumers: For those who receive insurance through their workplace, the health insurance plan will send a rebate to the employer. It is then the employer’s responsibility to either pass that rebate on to the individual or use it in other ways that may benefit the employee, such as lowering premiums for the next year.
Eventually those rebates would decrease as insurance companies become more compliant, which would mean that consumers would be receiving a greater benefit from their premium dollars. This is not small change, either. For decades the health insurance company has continued to increase premiums, decrease services and benefits and make more and more money all while leaving many insured Americans saddled with medical debt. That debt is a drag on the economy and a parasitic force on the middle class. Remember that as the political posturing takes place from the right should the court strike down the law.
Photo from 401K 2012 via flickr.