A new provision of the Affordable Care Act — called the Medical Loss Ratio, or the “80/20″ provision — could mean some Americans will see a rebate from their health insurance companies tomorrow.
The provision is aimed at holding health insurance companies accountable for how they spend the money collected through premiums. It compares the dollars they spend on health care costs vs. other overhead costs — like marketing, salaries and administrative expenses.
Under the law, small-group and individual-plan insurance companies that annually spend less than 80 percent of premium dollars on medical care owe their customers a rebate. For insurers to large businesses, the percentage split is 85-15.
This is the first year the provision is in effect, and insurance companies that owe rebates must pay them by tomorrow, Aug. 1.
Here’s a look at the health care rebates, by the numbers:
- Health insurance companies have to pay out a total of $1.1 billion in rebates by tomorrow.
- About 12.8 million Americans will receive a rebate, according to the Department of Health and Human Services.
- The average privately insured family will see a $151 rebate from this provision, but payouts will vary by state.
- About 31 percent of Americans who have individual insurance are eligible for a rebate. They’ll get their checks directly in the mail, averaging about $127, according to a study by the Kaiser Family Foundation.
- For people who buy insurance through their employers, those rebates won’t come directly in the mail. They’ll first go to the employer, which decides how to distribute it. Employers who offer insurance can either send out individual checks to their employees, or put those rebates toward lowering future premium costs.
The employer could also use the rebates as a lump-sum reimbursement to the accounts that pay premiums, or spend it in other ways that “benefits its employees,” according to the Department of Health and Human Services. This can include lowering copays or adjusting cost-sharing to cut group insurance costs.
Employees should contact their employer for details about how their rebates will be distributed.
Whether they owe a rebate or not, insurance companies in every state have to notify their customers by tomorrow if they’ve met or failed this part of the law.
For information on how your health insurance company stacks up on the 80/20 provision, click HERE: http://companyprofiles.healthcare.gov/
ABC’s Amy Bingham contributed to this report.