Is there such thing as a private health insurance rebate?
At the beginning of this year the Affordable Care Act provision limiting the percentage of profits a health insurance company can make went in to effect. Many people are confused on how it will work and if they will receive a rebate. There is a chance you could receive a rebate from your private health insurance company.
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The provision requires health insurance companies spend at least 80% of revenue on medical care. This would leave only 20% for profit and overhead like salaries. If a company fails to meet this obligation they will have issue rebates to all of their policy holders to make up the difference. Most people will not receive a rebate because the purpose of the law was to lower costs on private health insurance.
States Following the New Law
Many states worry that the medical loss ratio provision will harm their economy and drive insurance companies out of their states. The National Conference of State Legislatures says that as of January 17, many states have applied for a waiver.
The waivers would address the specific reasons it is needed as well as a detailed plan on how the state would incorporate the provision over the next few years. So far only six states have been granted waivers:
- Maine
- Iowa
- Nevada
- Kentucky
- New Hampshire
- Georgia
The following states were denied waivers:
- Michigan
- Delaware
- Louisiana
- North Dakota
- Indiana
- Kansas
- Florida
- Oklahoma
- Texas
The U.S. Department of Health & Human Services reviews each one of these waivers and supplemental information provided by a state to determine if there is cause for concern. In the states where the waiver was denied it was deemed that the 80/20 mandate would not cause economic distress. In Texas it is expected that 9 million people will receive a rebate the first year.
Exemptions from the Provision
Not all health insurance companies will be required to issue refunds under this law. The federal government acknowledged that the requirement could force smaller companies under and create an unstable market. The government created guidelines to help avoid this problem.
Health insurance providers with less than 1,000 enrollees will be exempt completely. They are viewed as lacking the experience to create a realistic basis of medical cost ratios. Simply put they do not have enough policy holders or time in the market to accurately determine how much they will pay in health insurance claims and therefore will not have to provide rebates if the spend less than 80%.
Companies with less than 75,000 policy holders are given partial credibility. This means they may only have to send part of the over payments out in rebates.
Once a company has more than 75,000 people enrolled they will have to provide full refund amounts for overpayment.
When a company starts selling health insurance they will receive three years to comply with the law. They will be closely monitored though to make sure they do not take advantage of this to build profits or price gouge.
Mini med plans are structured differently than traditional insurance policies and do not use the same pay structure. These plans are designed to cover only basic or routine care and prescriptions. They do not provide coverage for catastrophic health care such as emergency room visits. They have devised a special set of adjustments to address these policies since the 80/20 rule will not work.
How the Health Insurance Rebates Will Work
If a company is required to issue rebates they will have to send them out by August 1st of each year. The funds will be distributed based on the amount of health insurance premiums you paid in. Higher premiums will receive a larger portion. Insurance companies will be required to report revenue and spending to the Department of Health & Human Services for review.
For individual policies the rebate will be sent directly to the enrollee. Group policy rebates will be sent to the employer for distribution. Employers are required to notify employees of that the company will be receiving a health insurance rebate and fair distribution of the funds. These rebates will not be subject to taxation regardless of the type of policy you have.
Even if you do not receive a rebate your health insurance company must provide policy holders with information on spending. They may choose to send this to everyone or may require you submit a written request for the information.
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