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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Nationally

More than 3 million individual policyholders will reap rebates of $426 million, averaging $127 apiece. Consumers in Texas, Oklahoma, South Carolina and Arizona are most likely to be eligible for the payments, due starting in August, from 215 insurance plans that did not meet the standards in the law.

In the small-employer market, plans covering nearly 5 million people will receive rebates totaling $377 million.

The study found that plans in the large employer market were more likely to be in compliance with the law's requirement.

Nonetheless, 125 plans covering 7.5 million people reported to state regulators that they will give back a total of $541 million.

In Oklahoma

The report shows 265,417 Oklahomans are enrolled in plans that will give $22 million in rebates in the state.

In the individual market, rebates from nine insurance plans will average $97 per person, the report says. In the small group market, rebates from four plans will average $79 per person.

And in the large group market, rebates from three plans will average $35 per person.

In January, the Obama administration rejected a request from Oklahoma Insurance Commissioner John D. Doak to shield some health insurance companies from the 80 percent requirement.

Doak said the decision could lead to “massive disruption” of insurance markets in the state, but the Department of Health and Human Services said consumers would get a better value for their insurance premiums.

The report shows the rebates are only one of the ways in which consumers may benefit from tighter scrutiny of the health insurance industry under the federal law, which provides funding for state regulators to monitor the companies more closely.

Self-conscious insurers may be hesitating to push state regulators for premium increases as large as they were able to win in the past.

“This ‘sentinel' effect on premiums has likely produced more savings for consumers and employers than the rebates themselves,” the report stated.

Flyspeck scrutiny of the insurance industry won't solve the problem of rising health care costs, the report acknowledged, but it “can help to ensure that consumers and businesses get greater value for their premium dollar.”

The numbers in the report are estimates. Final totals won't be issued by the federal government until early summer.

Seventeen states applied for waivers from the 80-percent standard, producing evidence that it would destabilize their private health insurance markets. Federal regulators granted adjustments to seven states, usually meeting each state's request part way.

The future of the rebate requirement is uncertain, pending a decision by the Supreme Court on the constitutionality of Obama's law.

Contributing: Chris Casteel, Washington Bureau