Thursday, July 12, 2012

HEALTH INSURANCE PREMIUM REBATE

The new health reform law, the Affordable Care Act, holds health insurance companies accountable to consumers and ensures that American families are reimbursed if health insurance companies don’t meet a fair standard of value.

Because of the Affordable Care Act, insurance companies now must reveal how much of premium dollars they actually spend on health care and how much they spend on administration, such as salaries and marketing. This information was not shared with consumers in the past. Not only is this information made available to consumers for the first time, if an insurance company spends less than 80% of premiums on medical care and quality (or less than 85% in the large group market, which is generally insurance provided through large employers), it must rebate the portion of premium dollars that exceeded this limit.

On June 1, 2012, insurance companies nationwide submitted their annual MLR reports for coverage provided in 2011 to the Department of Health and Human Services (HHS). Based on this data, insurance companies that didn’t meet the 80/20 rule will provide nearly 12.8 million Americans with more than $1.1 billion in rebates this year. Americans receiving the rebate will benefit from an average rebate of $151 per household.

Under the new health care law, rebates must be paid by Aug. 1 each year. As a result, 12.8 million Americans will see one of the following:
• a rebate check in the mail
• a lump-sum reimbursement to the same account that was used to pay the
   premium if it was paid by credit card or debit card
• a direct reduction in their future premiums
• their employer providing one of the above rebate methods, or applying the rebate
   in a manner that benefits its employees.

Consumers in every state will also receive notifications from their insurance company about the 80/20 rule. Under the Affordable Care Act, insurance companies will send a letter to subscribers every year they miss the 80/20 mark. The letter will explain the purpose of the 80/20 rule, how far the insurance company fell short of this goal, and the percentage of premium it owes in rebates. In 2012, insurance companies that meet or exceed the standard in the 2011 coverage year will send a notice to consumers explaining the purpose of the 80/20 rule and notifying consumers that they met or exceeded the standard. Insurance companies will provide consumers with unprecedented information about the value consumers get for every dollar spent on premiums. All of this information will be publicly available on HealthCare.gov.

For years, Americans have watched their premiums rise faster than their wages. Although these increases are partly due to rising medical costs and utilization of services, they are exacerbated by rising insurance company administrative costs (including marketing and salaries of CEOs) and profits, which contribute little or nothing to the care of patients or the health of consumers.

Many Americans are working hard to ensure that their families have health insurance coverage, and they do not deserve to have their premium dollars wasted on excessive administrative costs and profits. The Affordable Care Act and the 80/20 rule guarantee this right for consumers, and the over $1.1 billion in rebates provided through this rule show that insurance companies can no longer pass excessive administrative costs and profits on to consumers.

If you have received a rebate check and have questions on how to allocate the rebate
between the employer and employees, please contact our office at (219) 769-3616 or
e-mail your questions to dvanprooyen@swartz-retson.com.
SWARTZ, RETSON & CO., P.C.

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