Millions of consumers and small businesses will receive an estimated $1.3 billion in rebates from their health insurance plans this summer, according to a recent study by the Kaiser Family Foundation, a nonpartisan research group. A recent analysis by Goldman Sachs put the figure at $1.2 billion.
The savings are the result of a provision in the Affordable Care Act that limits what insurers can charge for administration and profits.
According to the Kaiser study, the rebates will add up to $426 million for those who buy their own insurance, $541 million for large employers and small businesses will get $377 million.
More than 3 million policyholders and thousands of companies will be affected, the study found, with nearly one third of people who bought their own insurance last year getting rebates averaging $127.
This study shows that asking insurance companies to put more of their premium dollar towards patient care rather than administration and profits is not only popular but also effective,” said Kaiser President and CEO Drew Altman in a press release. “There are tangible benefits for consumers and employers.”
Beginning in 2011, the ACA requires insurance plans to pay out a minimum percentage of premium dollars towards health care expenses and quality improvement activities, limiting the amount spent on administrative and marketing costs and profit.
Under the law, large group plans are required to spend at least 85 percent of premium dollars on health care and quality improvement, while small group plans must spend at least 80 percent. These ratios are known as the Medical Loss Ratio (MLR). If an insurer fails to meet the MLR within a market segment in a state, they must issue a refund to consumers and employers by Aug. 1.
Although the rebates may not be particularly large in many cases, the study indicates they’re not the full measure of the MLR provision’s impact.
“The presence of these thresholds and the corresponding rebate requirement have provided an incentive for insurers to seek lower premium increases than they would have otherwise, and in some cases premiums have even decreased. This ‘sentinel’ effect on premiums has likely produced more savings for consumers and employers than the rebates themselves,” the report concludes.
