$500 million in health insurance rebates sent to consumers

By Maryalene LaPonsie on July 7th, 2013

The Department of Health and Human Services is crediting the health reform law with saving consumers $3.9 billion on their health insurance premiums in 2012. The savings included upfront reductions in premiums as well as $500 million in rebates issued to 8.5 million health plan enrollees.

The announcement came in tandem with a government report on medical-loss ratios. The ratios represent the percentage of premium dollars an insurer uses for direct health care costs. Under the Patient Protection and Affordable Care Act, insurers must spend 80 to 85 percent of the premiums they receive on direct health care. Any company not meeting that percentage must return the excess premiums back to consumers.

Lower health insurance rates, better coverage for 78 million people

According to HHS, the new medical-loss ratio rule saved money for nearly 78 million people in 2012. Of the estimated $3.9 billion in savings, $3.4 billion came from lower initial premiums or lower out-of-pocket costs. The department notes companies may have lowered their health insurance rates or expanded their health insurance coverage to ensure they met the new ratio requirement.

Those companies that failed to spend the required amount on health care costs were required to issue rebates for any excess premiums.

"The health care law is providing consumers value for their premium dollars and ensuring the money they pay every month to insurance companies goes toward patient care," HHS Secretary Kathleen Sebelius said in a written statement. "Thanks to the law, 8.5 million Americans will receive $500 million back in their pockets and purses."

The rebates average out to $100 per family among those enrolled in affected plans. Health insurance companies must notify those eligible for premium rebates, and that money may be returned to individual consumers via a rebate check, credit or debit card reimbursement or a reduction in future premiums. Rebates must be issued by Aug. 1.

Medical loss ratios and affordable health insurance

Prior to the passage of the Patient Protection and Affordable Care Act, medical loss ratios were governed by state regulations and could vary widely. However, the health reform law now dictates medical-loss ratios that are to be used nationwide. All health insurance plans must use at least 80 cents of every premium dollar for health care costs. Plans that cover large groups -- typically those including 50 or more members -- must use at least 85 cents per premium dollar on direct health care.

According to the government, the medical-loss ratio requirement will help ensure companies are providing better quality and more affordable health insurance since plans out of compliance will either have to reduce their rates or expand their coverage.

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