Am I going to get a rebate from my health insurance company?

Consumer Reports News: June 20, 2012 04:44 PM

Update: New government rebate figures just out. See details in the fifth paragraph below.

Although I get dozens of questions a month from readers, not a single one has asked me this, perhaps a reflection of how little people know about Obamacare more than two years after it was passed.

But if they had asked, the answer would be "you very well might, thanks to a great provision of the Affordable Care Act."

Some background: the law says that insurers must spend at least 80 percent of the premium dollars they collect on actual medical care for policies sold to individuals and to small businesses (businesses with fewer than 50 employees). This percentage is called the "medical loss ratio." Policies sold to larger businesses have to spend 85 percent of premiums on health care. Plans that end up spending less than that have to return the excess money to customers in the form of rebates or credits on future premiums. The first set of rebates, for policies in effect in 2011, are due out on Aug. 1.

In total, 12.8 million Americans have more than $1.1 billion in rebates coming their way, according to figures released June 21 by the U.S. Department of Health and Human Services. The average rebate will be $151 but some consumers will get considerably more than that. For instance, individual subscribers in Mississippi will get back an average of $651, and small group subscribers in Georgia an average of $811.

Our colleagues at Consumers Union, the advocacy arm of Consumer Reports, have been crunching some preliminary numbers to determine which insurance companies in which states will be handing out rebates. To find out if you are in line for one, look for your state on this helpful interactive map they've created.

For instance, individual customers of Humana in Florida will share in nearly $11 million of rebates, while California small businesses that buy plans from Blue Shield of California will split $38.6 million.

How it works, according to CU's Blake Hutson, is that by Aug. 1 you should get either a check in the mail, or a credit against your next month's premium. The premiums will go to all plan customers in each category, in proportion to the amount of premium they paid. That means that older or sicker customers, who typically pay the highest premiums, will also get the biggest rebates.

If you split the cost of your premium with an employer, you will split the rebate in the same proportion.

Note that the rebate is not based on how much your health plan paid out to you, personally. So, for instance, if you paid $5,000 in premiums for health insurance in 2011 but only used $1,000 of health care, your insurance company does not have to pay you back anything as long as it spent at least 80 percent of its total premium income on health care for all of its insured customers.

Also, if you work for a company with more than a thousand or so employees you probably won't be in line for a rebate. Blake explains why:

Many large employers are "self-insured" meaning your employer pays for your health care costs rather than having you sign up with a health insurance provider. It's difficult to tell if you're in a self-insured plan because your employer probably still uses an insurance company to administer claims and receive access to discounted doctor rates so you probably still have an insurance card. Check with your HR department to find out if your plan is self-insured. These plans aren't subject to the medical loss ratio requirement and are not eligible for refunds, however, most self-insured plans operate with as little overhead as possible to keep costs down for employers and employees.

Source: Health insurance refunds — your questions answered [Consumers Union]

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Nancy Metcalf

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