Health insurance rebates may show up in your mailbox

February 23, 2012

Health insurance premiums always seem to be on the rise. But in a new twist, your health insurance company may be paying you if it's spending too much in areas besides medical care and quality improvement.

Since last year, the Patient Protection and Affordable Care Act requires your health insurer to spend at least 80 percent of the money it collects in premiums on health care and improving quality. If too much was spent on other costs - like marketing and salaries - in 2011, you could get a rebate this year.

The medical loss ratio, which is also known as the 80/20 standard, requires your health insurance company to tell you how it spent the money it has collected. The medical loss ratio is used to set premiums.

The standard requires at least 80 percent of premiums to be spent on medical care and quality improvement if you have individual insurance or are a member of a small group plan. For members of a large group plan, at least 85 percent of premiums should be spent on quality improvement and care.

Some health insurers have already reduced premiums as a result of the standard, or upped their spending on quality improvement and medical care.

If they failed to do so, they'll need to refund money to their customers.

Rebates must be paid by August

The U.S. Department of Health and Human Services estimates rebates to consumers or employers could total $323 million.

The money must be paid out by Aug. 1, and could be issued through premium credits or actual rebates.

Some experts believe the move will force insurance companies to meet the 80/20 standard because they don't want to look bad to their customers.

But others anticipate unintended consequences. They fear the new rules will force many small insurance brokers out of business because they won't receive enough in commissions to be able to keep their doors open.

Those who buy their health insurance online would not be affected by the move, but it could impact consumers who want to speak to a broker for insurance advice.

A report by the Government Accountability Office found that in 2010, almost two-thirds of health insurance companies already conformed to the 80/20 standard, even though the health care reform rule wasn't in effect at that time.

Insurers serving the large group market were most likely to have met the standard, while those serving individuals were least likely to have reached that goal.

Susan Ladika

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