WASHINGTON, DC - FEBRUARY 15: Health and Human Services Secretary Kathleen Sebelius testifies during a Finance Committee hearing on Capitol Hill on President Obama's Fiscal 2013 budget request for the Department of Health and Human Services. (Image credit: Getty Images via @daylife)More than $1 billion is headed to consumers and employers this summer from their insurance companies thanks to a part of the federal health law that requires a rebate from plans that don’t spend at least 4 of every 5 premium dollars on medical care.
A new study by the Kaiser Family Foundation estimates the rebates at $1.3 billion, which should arrive by August, from health plans that spent too much on administrative overhead. The money paid will be tax free to the recipients, according to rules on so-called medical-loss ratios that are part of the Affordable Care Act signed into law two years ago by President Obama.
Under the law, individual policies and those sold to small groups with 49 or fewer workers generally have to spend 80 percent of health plan subscriber premiums on health costs. Policies sold to businesses or groups with more than 50 workers typically have to spend at least 85 percent of premiums on medical care.
Supporters of medical loss ratios say they are important because they differentiate between how much of the premium goes toward medical claims and how much of the premium goes toward administrative expenses.
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