Health insurers likely to refund some premium charges

May 13, 2012
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According to an analysis conducted by the Kaiser Family Foundation, health insurers are expected to rebate $1.3 billion in premium charges to employers and consumers by August because the companies didn’t spend enough on customer coverage in 2011.

The foundation reported in late April that the nation’s large employer market will receive a rebate of $541 million, while small businesses will receive a refund of $377 million. Consumers who bought insurance on their own are expected to receive $426 million.

“This study shows that asking insurance companies to put more of their premium dollar toward patient care rather than administration and profits is not only popular but also effective. There are tangible benefits for consumers and employers,” said Drew Altman, foundation president and CEO, in a release.

More than a quarter of small businesses, almost 20 percent of large employers and nearly a third of individual buyers that purchased insurance coverage last year are projected to receive a rebate. Those in Texas and Florida will see the largest refunds: $186 million and $148 million, respectively. The KFF report found that businesses and consumers in Michigan should receive nearly $19 million.

The rebates are being made because the 2010 Patient Protection and Affordable Care Act required each health insurer to spend a specific percentage of its premium revenue to provide care and to make its coverage plans more cost efficient. The law mandated that insurers spend at least 85 percent of revenue collected from large group plans on care and improvements, and a minimum of 80 percent for the small group plans in those areas.

The U.S. Supreme Court is expected to reveal its decision next month about whether the PPACA, or just some portions of it, is constitutional. The insurance companies are expected to issue the rebates this summer with all being sent to customers by August.

In their most recent annual survey of employer-sponsored health plans, the Kaiser Family Foundation and the Health Research and Educational Trust found that the average premium for family coverage topped $15,000 last year — a 9 percent increase from 2010. Employers paid an average of $10,944 of that total premium, while employees paid $4,129.

The average individual worker’s plan cost $5,429 in 2011, or 8 percent more than the previous year. Employers paid all but approximately $1,000 of that total premium. Roughly 60 percent of all employers offered workers health benefits last year.

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