IE 11 is not supported. For an optimal experience visit our site on another browser.

Health insurer refunds may stall in employers' hands

Under the health care law, insurers must issue refunds if less than 85 percent of premiums pay for care. But people on employer plans may have to wait for the cash, if they see it at all.
Douglas Lasdon, executive director of the Urban Justice Center, divided a $17,000 check from Oxford among his employees.
Douglas Lasdon, executive director of the Urban Justice Center, divided a $17,000 check from Oxford among his employees.Christopher Gregory/The New York Times
/ Source: The New York Times

It was the great health insurance giveback: $1.1 billion in premiums returned to policyholders under the Affordable Care Act. But while many people who buy their own insurance found a check in the mail last week, millions insured through employers are still wondering what is happening with the money.

Workers were notified in form letters from insurers this month that a “rebate” had been sent to their employer, who “must follow certain rules in distributing the rebate to you.” But even when employees paid a significant share of the premium, many employers are still deciding how, when or even whether to share the cash.

Calls are now pouring into human resources departments around the country, said Mendy Stein, a health benefits specialist with Mercer, a nationwide consulting firm.

“We’re seeing a very high increase in the number of calls that H.R. call centers are handling from employees saying, ‘Where’s my money?’ ” he said.

The law gives employers up to three months and considerable discretion to decide how to spend the employees’ money, so long as it is eventually used to benefit insurance plan participants. And while some employers are returning the money directly in paychecks, or planning “premium holidays” that increase take-home pay, others are weighing different options, benefits consultants said, like reducing next year’s premium, or spending the refund on so-called wellness programs that reward workers who lose weight orquit smoking.

“What they’re doing right now is trying to figure out what to do with the money,” said J. D. Piro, a health benefits specialist with Aon Hewitt, which handles human resources administration for companies around the country, including some that received hefty six-figure checks in late July. “It came as a surprise to many employers.”

In New York State, $76.8 million was returned to large employers — more money than in any other state. Most of it — $49,652,329 — was paid out by Oxford, part of UnitedHealthcare, which sent out letters about the refund to more than 439,000 employees working for about 2,300 companies in the state, all large group policyholders with more than 50 employees.

Maria Gordon-Shydlo, a spokeswoman for UnitedHealthcare, said the money averaged out to $113 per covered employee. Six other insurers, including Cigna, Aetna, Nippon Life Benefits and the United States Life Insurance Company in the City of New York, also made refunds to large employers in the state.

The federal health care law required the refunds because the insurers had spent more than 15 percent of the premiums they collected last year on overhead like salaries and advertising, and less than 85 percent on health care. Nationwide, rebates to large employers reached $37.8 million in the District of Columbia, $30.5 million in Pennsylvania, $25.6 million in Florida and $18.1 million in Texas, but were under $12 million in many other states, including California, New Jersey and Connecticut.

“It’s confusing, because it almost seems like it’s all in the employers’ hands and it’s up to you, the person who got the letter, to ask your employer about how the money is going to come through,” said Carina Kleter, 32, a project coordinator at Parsons the New School for Design, who finally opened her letter from Oxford this week during what she called “a cleaning rampage.”

“I haven’t gotten any letters from the H.R. department about how it’s going to work,” she said.

Besides suggesting a call to the employer, the letter gives a number for the United States Department of Labor’s Employee Benefits Security Administration. About 10,000 calls have come in so far, Michael Trupo, a department spokesman, said Wednesday.

“We have worked with employers to help ensure they know how to handle the rebates in accordance with the law,” he said in an e-mail, adding that employees who suspect they are not benefiting from a rebate provided to their company can contact the agency at 1-866-444-3272. The amount of the rebate that employers must return to employees, or spend for their benefit, is generally limited to the amount that the workers contribute to their premiums. So if a company pays 70 percent of its workers’ premiums, it can keep 70 percent of the rebate. But one city employer, the Urban Justice Center, distributed its $17,000 check from Oxford to employees, even though the nonprofit agency pays the whole premium for their health coverage. Douglas Lasdon, executive director of the agency, which provides legal services to the homeless and other poor New Yorkers, estimated that 65 employees would get about $260 each.

“Who wouldn’t like that?” Mr. Lasdon said. “By giving the money to employees immediately, we are helping to stimulate the economy. We hope they buy shoes.”

One agency worker, Andriana Ongoiba, said it would go for necessities. “It’s like a free week and a half of day care!” she said.

But few companies are willing to give up their share of a refund, according to Michael Cornetto, an insurance specialist with Corporate Consulting Services. “Our guidance to our clients is to distribute it fairly,” Mr. Cornetto said. “The first question is, whose money is it? Who paid for the premium in the first place?”

Employees are understandably confused, he added. Even if their insurance is administered by one of the carriers on the refund list, and the employees pay toward the cost of coverage, they are not entitled to a refund if their company is self-insured. If a business has fewer than 50 employees, the insurer is allowed to spend up to 20 percent of premiums on overhead. And with hundreds of different “rebate pools” linked to different insurance products, the same insurer may owe money to one company, but not to its neighbor.

Still, since employees often pay 30 percent or more of the premium through payroll deductions, their portion of a refund can be significant, noted Shawn J. Nowicki, director of health policy for the Northeast Business Group on Health, a coalition seeking to reduce health care costs.

Besides paying the money back directly, he said, two other options are allowed: using the refund to reduce next year’s premium, or spending it to “enhance benefits.” That could include wellness programs aimed at keeping employees healthier and more productive, he said.

“It’s really on an employer-by-employer basis,” Mr. Nowicki added. “The construction company is going to be very different from the 300-person financial services company.”

But spending the employees’ share to reward ex-smokers or dieters in a wellness program is asking for trouble, even if it passes legal muster, cautioned Helen Darling, chief executive of the National Business Group on Health, a nonprofit association of 342 large employers.

“The feeling might be that the company got money that they so-called ‘pocketed’ and then, to earn it back, you have to do what the employer says,” she explained. “You could quickly turn a positive into a negative.”

Her advice: “Give it back.”

At Sage Realty, a building management company in Manhattan with about 90 employees, the comptroller, Lou Pisano, said payroll software would make it easy to return the workers’ 10 percent share of a $15,000 rebate check in a couple of weeks.

“The insurance companies were basically pocketing that money in the past,” he said, rejecting the idea of applying it to next year’s premium, because “that’s kind of like a moving target.”

“Most people,” he added, “are happy just getting a little more money in their check.”

Juliet Linderman contributed reporting.

This story, "Health insurance refunds may stall in employers' hands," originally appeared in The New York Times.