In a blog post today, U.S. Secretary of Health & Human Services, Kathleen Sebelius, announced that due to the Affordable Care Act (President Obama’s Health Reform Law, which some call “Obamacare”), about 15.8 Million Americans will receive an estimated $1.3 Billion in rebates from insurance companies, starting in August, 2012, according to the latest estimates from the Kaiser Family Foundation.
The rebates on insurance premiums will be due to consumers from insurance companies that have failed to comply with the Medical Loss Ratio provision of the Affordable Care Act. The Medical Loss Ratio provision, also known as the 80/20 rule, requires insurers to spend at least 80% of each premium dollar on medical care and quality improvement, rather than on administrative costs. If an insurer does not meet the 80/20 standard, it is required to issue rebates to its consumers starting in August, this year.
“You can be sure that insurance companies are spending generally at least 80 cents of every dollar you pay in premiums on your health care or activities that improve health care quality,” HHS Secretary Sebelius said in her May 11, 2012 blog post. “If the insurance company fails to meet this standard, or the ‘medical loss ratio,’ in any year, they have to pay you a rebate,” she explained.
“Consumers eligible for rebates should expect to see them in their mailboxes by August,” Secretary Sebelius said in an earlier, April 27 blog post. According to reporting by Time, some of the checks have already gone out.
On Friday, along with Secretary Sebelius’s post, the Department of Health & Human Services (HHS) provided a sample letter that the insurance companies which have failed to meet the requirement that they spend at least 80% of each premium dollar on health care, will send to policyholders, letting them know how much they will be receiving as a rebate.
“According to early estimates from the Kaiser Family Foundation, insurance companies will provide 15.8 million Americans with $1.3 billion in rebates,” Secretary Sebelius noted in her May 11 post.
In a report issued in April, 2012, the Kaiser Family Foundation reviewed the estimates of 2012 rebates submitted by insurers under the Affordable Care Act, and found that the rebates to be paid in August will average around $127 per person for the over 3 million individuals who will receive them directly.
In addition, Kaiser reported that small employers (who provide health insurance for almost 5 million people) will receive rebates totaling about $377 million (an average of $76 per employee), while larger employers (who provide health insurance covering about 7.5 million people) will receive rebates totaling approximately $541 million (an average of $72 per employee). Employers are obligated to pass those savings on to their employees, according to administration officials.
Tables in the Kaiser Family Foundation report provide estimates as to the aggregate rebates to be paid to individuals, to small employers and to large employers in each State of the U.S. Following are some examples:
Florida: 1,753,065 people get $148,589,661
Ohio: 211,930 people get $10,727,574
Virginia: 642,886 people get $40,896,992
Iowa: 66,040 people get $1,239,379
Colorado: 511,684 people get $25,725,984
Michigan: 144,542 people get $18,995,911
Nevada: 75,633 people get $8,771,820
Pennsylvania: 1,064,019 people get $104,533,779
New Hampshire: 3884 people get $244,132
Noting that the above States could be swing-states capable of deciding the Presidential election in 2012, Time surmised that the rebate checks being sent in August due to the Affordable Care Act, could help President Obama explain the benefits of the Health Care Law, and could potentially impact the election.
“The size of the checks will vary, but for many working Americans, they are likely to be the most tangible, and welcome, sign of the law’s benefits,” Time reported. “This cash could be a true game changer in public attitudes about whether the law actually is beneficial and good public policy,” according to the Time report.
Following is HHS Secretary Kathleen Sebelius’ blog post of May 11, 2012, in its entirety:
Guaranteeing Value for Your Premium Dollars
By Kathleen Sebelius, Secretary of Health and Human Services
When we pay for health insurance, we want to know that most of what we are paying for is for health care, not advertising, executive bonuses or overhead. It’s pretty simple: we want to get a good value for our premium dollars.
Thanks to a new rule (the “80/20 rule”) in the Affordable Care Act, you can be sure that insurance companies are spending generally at least 80 cents of every dollar you pay in premiums on your health care or activities that improve health care quality. If the insurance company fails to meet this standard, or the “medical loss ratio”, in any year, they have to pay you a rebate.
Insurance companies that didn’t meet the standard for coverage provided in 2011 are required to provide these rebates no later than August 1st of this year, and to make sure you know what you are owed, insurance companies that owe rebates will also send a letter telling you how much you’ll receive. You can see what that letter will look like here. According to early estimates from the Kaiser Family Foundation, insurance companies will provide 15.8 million Americans with $1.3 billion in rebates.
Today, we’re also finalizing a notice for insurance companies to send you if they meet or exceed the standard. If your insurance company is providing fair value for your premium dollars, you should know that too. You’ll be able to see your plan’s medical loss ratio on HealthCare.gov starting this summer.
If you don’t get a rebate, that means your plan may have lowered prices or improved your coverage already. For example, one insurer in West Virginia improved its medical loss ratio by lowering premiums by an average of $2,500 for 4,200 small businesses, cutting their premiums to give consumers welcome cost relief. This is one of the ways the 80/20 rule is bringing value to consumers for their health care dollars.
Thanks to the Affordable Care Act rate review program, health insurers are also being held accountable for health insurance rate increases. Insurance companies are now required to disclose to their customers rate increases of 10 percent or more and to justify these increases – and HHS and the States have the authority to determine whether these increases are reasonable. For the first time, you can find all of this information about rate increases in your State in one location, at http://companyprofiles.HealthCare.gov/.
The 80/20 rule and the rate review program are two ways the Affordable Care Act is protecting you. You can find out more about how the Affordable Care Act increases transparency and protects consumers here: http://www.healthcare.gov/news/factsheets/2012/02/increasing-transparency02162012a.html.
More Information
For more information about the Affordable Care Act and health care reform and policy, see the HelpingYouCare™ resource pages on VoicesForCare™, including:
- News on Health Care Reform;
- Editorials: What Needs Improvement, With Your Comments;
- Advocacy: Proposals for Reform, With Your Comments;
- Legislation: Pending & Recently Adopted; and
- International Health Care Compare: Information on Health Care & Long-Term Care Solutions in Other Countries.
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