While there has been a lot of attention of attention on the individual mandate portion of the Affordable Care Act, there are other provisions involved. And, one of the changes required by the Affordable Care Act  is that health insurance companies have to provide rebates when they don’t spend a certain amount of premium money on health care services.
The first rebate was due August 1, 2012, and each year insurance companies will be responsible for accounting for how premium dollars are spent. When a certain ratio isn’t met, insurance companies are required to provide rebates to their customers.
How Much of Rebate are We Talking About?
Rebates vary by state, but the government reports that the average privately-insured family received $151 back. There are expectations that 12.8 million Americans, and a total of $1.1 billion, in the August 2012 pay out.
The payouts are figured using an 80/20 formula. In it, 80% of the premiums collected by health insurance companies on small-group and individual plans are required to spend at least 80% on medical care. For larger plans, such as the insurance covering bigger businesses, insurers are supposed to spend at least 85% of what they collect in premiums on medical care.
When this doesn’t happen, insurers are supposed to return money to consumers.
How Do You Collect Your Rebate?
If you are entitled to a rebate, you will receive it automatically, in one of these forms:
- A check in the mail.
- Reduction in future premiums.
- Refund to the account that premiums come out of.
- Application by employer in a way that benefits employees.
If you are on an individual plan, you will receive your rebate (if you are eligible) from your insurance company. If your insurance is through an employer, the rebate will first go to the company, and then the employer will distribute the rebates.
You can get information about your insurance company from HealthCare.gov . The profiles for the company include information on rate reviews, as well as the medical loss ratio — which is the number used to determine whether or not the insurer owes a rebate. Just checking my insurance company’s profile, it appears that my insurer uses most of the money for medical costs, so I’m not due a rebate.
This isn’t the only year that rebates will be issued, however. The point of this provision is to force health insurance companies to be more accountable for what they do with premium money. Rather than collecting your premium and then using it on advertising, executive pay, and administrative costs, it is supposed to mostly go to medical expenses. Insurers are incentivized to put more of that money toward health costs, since they have to pay out rebates if they don’t.
If you are due a rebate, find out how it will come. Check with your employer to determine how you can expect to receive your rebate. If you are expecting something from your insurer, due to an individual policy, you should already have it. If you don’t contact your insurer for more information.
(Photo: Alex E. Proimos )