July 3, 2012 at 7:43 AM ET
The nation’s health insurance companies will refund approximately $1.1 billion to their customers this summer. It’s one of the new benefits of the health care reform law.
The U.S. Health and Human Services Department expects 12.8 million Americans to get some of this money – although in the majority of cases that refund will be sent to employers.
Under the Affordable Care Act, health insurance companies are required to disclose how much of your premium dollar they actually spend on health care and how much they spend on administration, such as salaries and marketing. In the past, consumers did not have a right to this information.
But here’s the real game-changer: The 80/20 rule. If the insurance company spends less than 80 percent of premiums on medical care it must rebate the excess. For large group plans (the kind provided by companies that employ 50 people or more), health insurance companies must spend 85 percent of the premiums on medical care.
“The 80/20 rule helps ensure consumers get fair value for their health care dollar,” Health and Human Services Secretary Kathleen Sebelius said in a statement.
Any rebates must be paid by Aug. 1 each year. For those with individual policies, the refund can be a check, a lump-sum reimbursement to the credit or debit card used to pay the bill, or a discount on future premiums.
Rebates for group plans will go to the employer, but some of that money is supposed to be passed along to employees or used in a way that benefits them in the future – such as lower premiums.
The new law also requires health insurance companies to tell customers whether they hit, exceeded or missed the 80/20 mark. If they missed the goal, they must say by how much and what percentage of your premium will be rebated. This new transparency is unprecedented.
All of this information will be available on HealthCare.gov later this summer.
By the numbers
Health and Human Services says it expects the average rebate for a family that buys its own insurance to be $151. The states with the highest average rebates per family in the individual market are: Mississippi ($651), Alabama ($582), Maryland ($496), Delaware ($461) and West Virginia ($383). The average rebate in the individual insurance market is zero for families in Arkansas, Hawaii, Iowa, Maine, New Mexico, Rhode Island and Vermont.
Based on information submitted by the insurance companies in June, Health and Human Services says a majority of Americans are covered by companies that meet or exceed the 80/20 rule: 62 percent of people in the individual market, 83 percent in the small group market and 89 percent in the large group market.
The bottom line:
The new 80/20 rule is a major step forward in making health insurance companies responsible to their policy holders. It is hoped it will motivate insurers to lower prices and/or improve their coverage to meet the new standard.
So what about this summer’s rebates? Any way you look at it, a billion dollars is a lot of money. But it won’t solve the problem of skyrocketing medical bills. It’s just a drop in the bucket.
To solve the health care crisis, we must find a way to reduce the ever-increasing cost of medical care in the U.S. The current path is simply unsustainable and will devastate our economy. The national health care system needs a major overhaul. And it needs it STAT!
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