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Rebate Debate

June 26, 2013

premiumThe Department of Health and Human Services (HHS) announced that nationwide, 77.8 million consumers saved $3.4 billion on their health insurance premiums as insurance companies operated more efficiently.

Additionally, consumers nationwide will save $500 million in rebates, with 8.5 million enrollees due to receive an average rebate of around $100 per family.

The recent report includes the 2012 health insurer data required under the Affordable Care Act’s Medical Loss Ratio, or “80/20 rule.” The report shows that, compared to 2011, more insurers are meeting this standard and spending more of their premium dollars directly toward patient care and quality, and not red tape and bonuses.

Created through the Affordable Care Act, the rule requires insurers to spend at least 80 cents of every premium dollar on patient care and quality improvement. If they spend a higher amount on other expenses like profits and red tape, they owe rebates back to consumers. For many consumers, the report found that the law motivated their plans to lower prices or improve their coverage to meet the standard. This new standard and other Affordable Care Act policies contributed to consumers saving approximately $3.9 billion on premiums in 2012, for a total of $5 billion in savings since the program’s inception.

“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,” Health and Human Services Secretary Kathleen Sebelius said. “Thanks to the law, 8.5 million Americans will receive $500 million back in their pockets and purses.”

If an insurer did not spend enough premium dollars on patient care and quality improvement, rebates will be paid in one of the following ways:
•a rebate check in the mail;
•a lump-sum reimbursement to the same account that they used to pay the premium if by credit card or debit card;
•a reduction in their future premiums; or
•their employer providing one of the above, or applying the rebate in another manner that benefits its employees, such as more generous benefits.

Insurers that do not meet the standard will send consumers a notice informing them of this new rule. The notice will also let consumers know how much the insurer did or did not spend on patient care or quality improvement, and how much of that difference will be returned as a rebate.

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