Health care law rebates may top $1 billion

Insurance companies will have to return more than $1 billion this year to consumers and businesses, thanks to a new requirement in President Barack Obama's health care overhaul, a report released Thursday concludes.
By RICARDO ALONSO-ZALDIVAR Published: April 27, 2012
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Insurance companies will have to return more than $1 billion this year to consumers and businesses, thanks to a new requirement in President Barack Obama's health care overhaul, a report released Thursday concludes.

That total includes more than $22 million in rebates that will be shared by more than 265,000 Oklahomans.

That's real money, said Larry Levitt, of the Kaiser Family Foundation, which analyzed industry filings with state insurance commissioners. The law requires insurers to spend at least 80 percent of the premiums they collect on medical care and quality improvements — or issue rebates to policyholders.

“This is one of the most tangible benefits of the health reform law that consumers will have seen to date,” said Levitt, an expert on private health insurance. The nonpartisan foundation is an information clearinghouse on the nation's health care system, and its research is widely cited.

The report comes with a caveat. It lacks data on the nation's most populous state, California, because complete filings there were not available. Nonetheless, the analysis estimates that consumers and businesses in other states will receive rebates of $1.3 billion, in some cases in the form of a discount on next year's premiums.

The insurance industry says consumers should take little comfort from the rebates, because the companies expect premiums to go up overall as a result of new benefits and other requirements of the new law.

“The net of all the requirements will be an increase in costs for consumers,” said Robert Zirkelbach, spokesman for America's Health Insurance Plans, the main industry trade group.

“Given that health care costs are inherently unpredictable, it's not surprising that some plans will be paying rebates to policyholders in certain markets,” Zirkelbach said.

But backers of the rebate requirement say it will keep the industry from padding its profits at the expense of unwitting consumers.

They say an efficiently run insurer should not have any problem earning a healthy return after devoting 80 percent of premiums to medical care.

Indeed, the law sets an 85 percent requirement for plans that serve large employers.

“Millions are benefiting because health insurance companies are spending less money on executive salaries and administrative costs, and more on patient care,” said Sen. Jay Rockefeller, D-W.Va., a leading advocate of the rebate provision.

The study found the largest rebates will go to consumers and employers in Texas ($186 million) and Florida ($149 million), where Govs. Rick Perry and Rick Scott, respectively, have been among the staunchest opponents of the federal law.

Both states applied for waivers from the 80-percent requirement and were turned down.

Hawaii is the only state in which insurers are not expected to issue a rebate.