Obamacare Health Insurance Rebates: Who Gets a Check?

PHOTO: President Barack Obama speaks about the Affordable Healthcare Act in the East Room of the White House, July 18, 2013 in Washington DC. President Obama said that the affordable care act is holding insurance companies accountable and putting money b
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An estimated 8.5 million Americans will receive rebates from their health insurers this summer thanks to the Affordable Care Act, which says companies that fail to spend at least 80 percent of premiums on health care must refund the difference to consumers.

President Obama today touted the benefit as part of his mid-summer push to educate Americans on the continued rollout of his health care law.

"Last year, millions of Americans opened letters from their insurance companies. But instead of the usual dread that comes from getting a bill, they were pleasantly surprised with a check," he said. "Another 8.5 [million] rebates are being sent out this summer, averaging around a hundred bucks each."

So who will see a check in the mail?

It turns out only as many as one-third of those due rebates, or 2.7 million Americans, will actually receive physical checks, or direct refunds to their credit or debit cards. These are people who purchased a health policy on their own, with after-tax dollars, in the individual insurance marketplace.

The remaining 5.7 million Americans, who receive health insurance through an employer in the small-group or large-group markets, will not necessarily receive any direct financial reimbursement at all, according to the Center for Insurance Information and Consumer Oversight.

Instead, those with employer-sponsored health plans might see a "reduction in their future premiums" or in the form of "more generous benefits," as determined by the employer. Some could subsequently receive a cash refund from their employer, but the likelihood of that option is unclear.

The U.S. Department of Health and Human Services, which oversees and enforces the policy, says that redistributing rebates to group policyholders (e.g. employers) is complicated by the need for taxation if the money is returned to individual consumers. (Premiums for enrollees in group policies are paid for with pre-tax dollars. Refunds would then need to be subjected to tax.)

The agency urges employers to use the rebates in "ways that are not taxable."

"Policyholders must ensure that the rebate is used for the benefit of subscribers," the Obama administration mandates in its official guidelines on the rebate policy.

The law requires that insurers must mail a printed notice of the rebates to individuals and companies explaining why and how they will be provided, even if not ultimately in the form of a check.

The amount of the individual rebates varies widely by state and insurance company, depending on whether a consumer's insurer was in compliance with the law.

The largest average rebates will be seen in Washington state, where 3,007 consumers will receive an average $512 this summer. In Massachusetts, more than 473,000 people will see an average rebate of $457.

Other parts of the country will see lower average rebates, indicating that insurers in those states are meeting the so-called "80/20 rule" under Obamacare.

More than 633,000 New Yorkers will see an average rebate of $92 this summer, while in Missouri an average $72 will be refunded to 457,000 residents.

The White House says those who do not receive rebates are already experiencing savings and better quality care built-in to their health insurance plans. Eventually, officials say, the number and size of the rebates will dwindle as companies retool and become more efficient and compliant with the law.

"Even if you don't get a rebate, there's a good chance that these reforms are helping you as well because one easy way to meet the goal of spending 80 percent of every dollar on care is to charge less for your care," Obama said today.

"Because of this new rule, because of the fact that it improves the value of the coverage that you purchase, last year alone Americans saved $3.4 billion in lower premiums," he said.

Obama's public relations blitz on the rebates underscores one of the persistent challenges of selling the health care law three years after he signed it.

Many Americans still don't understand the financial benefits, despite the administration's appeals that they are numerous and tangible.

A survey by the Kaiser Family Foundation in April, before the White House's summer campaign on Obamacare, found that 49 percent of Americans say they don't have enough information to understand how the law will affect them and their families.

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