Health Care Reform Rebates For Health Insurance Costs Rolling In

Health insurance companies will pay out an estimated $1.1 billion in rebates to customers this month because of new rules from the health care reform law.

When Laird Le found a check for $70.02 in the mail, he wasn't quite sure why. Turns out, he's one of the estimated 13 million Americans that will receive a rebate on their health insurance premiums as a result of the health care reform law recently upheld by the Supreme Court.

Look inside your mailbox: By the end of the month, you could be getting one of these refunds, which are are expected to total $1.1 billion this year. Health insurance companies have begun sending letters to customers informing them of a new rule requiring them to spend at least 80 percent of the premiums they receive on actual medical care, not on overhead, advertising, profits or other costs. Health insurers must cite the health care reform law, known as the Affordable Care Act, in the letter.

Le, a 35-year-old self-employed information technology consultant in Chicago, didn't know about the new rules until he got the check from UnitedHealth Group subsidiary Golden Rule Insurance Company. "I was pretty surprised," Le said. At first, he was afraid the company was canceling his plan, which costs about $160 a month. Once he realized what it was, getting a check like that was "powerful," he said. "I wouldn't have gotten a penny if it wasn't for the law."

The authors of President Barack Obama's health care reform law aim to pressure health insurance companies to cut down on administrative costs and other expenses and to prevent them from raising premiums to maximize profits. The idea is to eliminate waste by health plans so they charge lower premiums in the future, said Blake Hutson, a health care advocate with Consumers Union in Austin, Texas.

"It's a way to increase value in health insurance," Hutson said. "What the rule does is encourage insurance companies to operate more efficiently."

"Insurance companies that are paying rebates now, they either charged you too much or they didn't spend enough of your money on things that benefit customers," he said, noting that health insurance companies are already reducing expenses or lowering premiums to comply with the rule. In the future, he predicted, more plans will do these things to avoid paying rebates. "We're starting to see some of the tangible benefits of the law," he said.

Health insurance companies selling plans to small-business workers and individuals who buy coverage on their own have to spend at least 80 percent of the premiums they collect on medical care. For health insurance from a larger employer, the standard is 85 percent. Since last year, health insurance companies have been required to publicly disclose what share of premiums actually goes to medical treatments for customers and from now on must refund the difference to individual customers or their employers.

More than 30 percent of people who buy health insurance on their own will be owed rebates this year, according to an analysis conducted by the Henry J. Kaiser Family Foundation of Menlo Park, Calif., in April. The foundation isn't affiliated with the health insurance company Kaiser Permanente.

The health insurance industry protests that capping their profits does nothing to address rising prices for medical services and products. Health insurance companies refer to the difference between premiums collected and claims paid as the "medical loss ratio" and the Obama administration describes its new standard as the "80/20 rule."

Employers and workers who get health benefits from their jobs will see most of money from the rebates, the Kaiser Family Foundation reported. So-called "self-insured" employers that directly pay for workers' medical expenses and contract with a health plan solely for administrative work won't get rebates.

Workers are entitled to the same share of the rebate as they pay for their health insurance, said Paul Fronstin, the director of Health Research and Education Program at the Employee Benefit Research Institute in Washington. "If an employer pays 80 percent and the worker pays 20 percent, then the rebate should be split 80/20," he wrote in an email. Workers would have to pay income taxes on any rebates and may not receive any money if the employer decides to use it to lower future premiums or add benefits, according to Fronstin.

The rebates, which the Kaiser Family Foundation projects will range from $1 to $517, can come in the form of checks, refunds to credit cards used to pay health insurance premiums, a discount on future premiums or payments to an employer providing health benefits. If you live in Georgia, Iowa, Kentucky, Maine, Nevada, or New Hampshire, you may be out of luck, however. The federal government allowed those states to set lower standards for health insurance companies this year. The administration denied 10 other states' requests for a waiver.

Amanda Terkel contributed reporting to this story.

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Health care insurers to dole out $1B in rebates to consumers

Health insurers will dole out a total of $1 billion in rebates to 12.8 million Americans this summer -- an average of $151 per family --as a result of the 2010 health care reform law, the government said Thursday.

The rebates announced by the Department of Health and Human Services come from a provision of the law that punishes insurers who spend too much of policyholders' premiums for boosting company profits instead of paying for their medical care.

However, it's unclear if insurers will have to issue rebates at all if the Supreme Court strikes down all of the health care law.

The court, which is reviewing the constitutionality of the Affordable Care Act, is expected to issue its ruling later this month. The court could uphold the law, overturn it partially or completely strike it down.

HHS spokesman Keith Maley said the agency was confident that the law is constitutional.

"We are focused on ensuring the benefits of the law are applied to Americans across the country, including ensuring consumers get value for their premium dollar," he said.

The rule mandated that, beginning in 2011, insurance companies would have to spend 80% to 85% of the premiums they collect on medical care instead of toward their own profits and overhead costs.

See average health insurance rebates by state

"The rule helps ensure consumers get fair value for their health care dollar," HHS Secretary Kathleen Sebelius, said in a statement.

Insurers that didn't increase that allotment to the new federal standard would have to give customers a rebate for the difference beginning in 2012.

Exchanges could survive even if health reform law dies

HHS said insurance companies that failed to meet the required "medical loss ratio" must provide a rebate for the difference to their customers no later than Aug. 1.

For families who buy their health insurance out of pocket, the average rebate is expected to be $152. In the small group insurance market, where many small businesses buy insurance for their workers, the average rebate per family is expected to be $174, the agency said.

Large companies that insure employees themselves will have to pay out an average rebate of $135 per family if they fail to meet the rule, HHS said.

HHS said consumers owed a rebate could get it as a check in the mail, a lump-sum reimbursement to the same account that they used to pay the premium if by credit card or debit card, or as a reduction in their future premiums.

3.1M young adults gained health coverage since law took effect

For affected policyholders who are insured through their employers, their companies could provide them with the check or reimbursement, or employers could apply the rebate in another manner that benefits their employees, the agency said.

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Independent Study Shows That Health Insurers Will Pay $1.3 Billion in Rebates

NEW YORK, NY--(Marketwire -04/27/12)- Health insurance companies' shares fell Thursday as independent study showed that health insurers will pay $1.3 billion in rebates. Nearly half of that sum is expected to be paid back from four major insurers: United Healthcare Group Inc., WellPoint Inc., Aetna Inc. and Coventry Health Care Inc. according to Goldman Sachs. The Paragon Report examines investing opportunities in the Health Care Plans Industry and provides equity research on WellPoint, Inc. (WLP - News) and Coventry Health Care, Inc. (CVH - News).

Access to full reports can be found at:

www.ParagonReport.com/WLP

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Under the Patient Protection and Affordable Care Act health insurers must spend 80 percent of premiums from individuals and small businesses, and 85 percent of premiums from large employers on health expenses and quality improvements. If an insurer does not spend enough on health costs it must refund the difference back to the consumer. According to a study published by the Kaiser Family Foundation approximately 31 percent of individual policyholders, or around 3.4 million people, are expected to get rebates.

Paragon Report releases regular market updates on the Health Care Plans Industry so investors can stay ahead of the crowd and make the best investment decisions to maximize their returns. Take a few minutes to register with us free at www.ParagonReport.com and get exclusive access to our numerous stock reports and industry newsletters.

WellPoint is expected to pay out around $94 million on $33.2 billion in eligible premiums. The company announced that first quarter 2012 net income was $856.5 million, or $2.53 per share, including net investment gains of $62.4 million after-tax, or approximately $0.19 per share. Net income in the first quarter of 2011 was $926.6 million, or $2.44 per share, including net investment gains of $35.6 million after-tax, or approximately $0.09 per share.

Coventry Health Care is a diversified national managed healthcare company based in Bethesda, Maryland. The Company announced that they will release first quarter 2012 financial results on Friday, April 27, 2012. Allen F. Wise, Chief executive officer, will be hosting a conference call at 8:30 a.m. ET on that day.

Paragon Report provides Market Research focused on equities that offer growth opportunities, value, and strong potential return. We strive to provide the most up-to-date market activities. We constantly create research reports and newsletters for our members. The Paragon Report has not been compensated by any of the above-mentioned companies. We act as independent research portal and are aware that all investment entails inherent risks. Please view the full disclaimer at:
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Report: Rebates from health care law will top $1B

WASHINGTON (AP) — More than 3 million health insurance policyholders and thousands of employers will share $1.3 billion in rebates this year, thanks to President Barack Obama's health care law, a nonpartisan research group said Thursday.

The rebates should average $127 for the people who get them, and Democrats are hoping they'll send an election-year message that Obama's much-criticized health care overhaul is starting to pay dividends for consumers. Critics of the law call that wishful thinking.

The law requires insurance companies to spend at least 80 percent of the premiums they collect on medical care and quality improvement or return the difference to consumers and employers. Although many large employer plans already meet that standard, it's the first time the government has imposed such a requirement on the entire health insurance industry.

"This is one of the most tangible benefits of the health reform law that consumers will have seen to date," said Larry Levitt, an expert on private insurance with the Kaiser Family Foundation, which analyzed industry filings with state health insurance commissioners to produce its report. Kaiser is a nonpartisan information clearinghouse on the nation's health care system.

Still, health insurance is expensive, and $127 may not even pay a month's worth of premiums for single coverage.

And the insurance industry says consumers should take little comfort from the rebates because premiums are likely to go up overall as a result of new benefits and other requirements of the law.

"The net of all the requirements will be an increase in costs for consumers," said Robert Zirkelbach, spokesman for America's Health Insurance Plans, the main industry trade group.

"Given that health care costs are inherently unpredictable, it's not surprising that some plans will be paying rebates to policyholders in certain markets," Zirkelbach added.

But the Kaiser report said the rebate requirement may be acting as a brake on the industry, discouraging insurers from seeking big premium increases to avoid having to issue refunds later and face possible criticism.

The new law has "provided an incentive for insurers to seek lower premium increases than they would have otherwise," the report said. "This 'sentinel' effect on premiums has likely produced more savings for consumers and employers than the rebates themselves."

The study found the largest rebates will go to consumers and employers in Texas ($186 million) and Florida ($149 million), where Govs. Rick Perry and Rick Scott have been among the staunchest opponents of the federal law. Both states applied for waivers from the 80 percent requirement and were turned down. Hawaii is the only state in which insurers are not expected to issue a rebate.

Here's how the rebates break down nationally:

More than 3 million individual policyholders will reap rebates of $426 million, averaging $127 apiece. These are consumers who are not covered through an employer and buy their policy directly. Consumers in Texas, Oklahoma, South Carolina and Arizona are most likely to be eligible.

Insurance companies must notify policyholders, and the rebates are due by Aug. 1. Some companies have already begun to pay.

In the small-employer market, plans covering nearly 5 million people will receive rebates totaling $377 million.

Employers do not have to pass their rebates on to workers, and can also take them as a discount on next year's premiums.

Insurers serving large employers face a stiffer requirement. Under the law, they must spend 85 percent of premiums on medical costs. The study found that 125 plans covering 7.5 million people at large employers will give back a total of $541 million.

Most plans operated by major national employers are exempt from the requirement. The biggest companies usually set aside money to cover most of their workers' medical expenses. Typically they hire an insurer to administer their plan, but they do not buy full coverage from the insurer.

Separately, a Goldman Sachs report estimated insurers would pay rebates of $1.2 billion. Among major insurers, UnitedHealth would pay $307 million, Aetna $177 million, WellPoint $94 million and Coventry $50 million.

Supporters of the requirement say it will keep insures from padding their profits at the expense of unsuspecting consumers.

"Millions are benefiting because health insurance companies are spending less money on executive salaries and administrative costs and more on patient care," said Sen. Jay Rockefeller, D-W.Va., a leading advocate of the rebate provision.

White House spokesman Jay Carney said the report shows how Obama's law is "already strengthening the health care system for millions of Americans."

Like everything else about the overhaul, the future of the rebates depends on whether the Supreme Court upholds the law in a decision expected by early summer.

Seventeen states applied for waivers from the 80 percent standard, producing evidence that it would destabilize their private health insurance markets. Federal regulators granted adjustments to seven states, usually meeting each state's request part way.

Data from the nation's most populous state, California, were not ready and thus were not included. Final statistics on the rebates will be issued by the federal government in early summer.

____

Online: Kaiser report - http://tinyurl.com/d2bcvxy

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Health Insurers Plan Over $1 Billion in Rebates

Health insurers will have to rebate about $1.3 billion to consumers and employers this summer, under a new health-care overhaul provision. Stefanie Ilgenfritz has details on Lunch Break. Photo: AP.

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Health insurers to pay $1.3 billion in rebates: study

WASHINGTON (Reuters) - Health insurers will pay $1.3 billion in rebates to consumers and employers this year under a provision of President Barack Obama's healthcare reform law that penalizes plans that devote too little of their premium revenues to health services, an independent study showed on Thursday.

The study, published by the nonpartisan Kaiser Family Foundation, said the data illustrated some of the tangible benefits that consumers and employers could expect from the embattled 2010 law if it survives two major legal and political election-year challenges.

The rebates, which are due by August 1, stem from premiums paid in 2011 on plans representing nearly 16 million beneficiaries. But Kaiser, a nonprofit healthcare research group, said most of the money is expected to go to employers rather than consumers.

The healthcare law, Obama's signature domestic policy achievement, has proved unpopular with many voters and could be struck down by the U.S. Supreme Court by the end of June or repealed next year if Republicans gain control of the Congress and White House in the November elections.

If the law were overturned or repealed, insurers would no longer be required to comply with the rebate provision.

"While the health reform law as a whole continues to divide the American public, there are tangible changes taking place that benefit consumers," said Kaiser President Drew Altman.

"Greater regulatory scrutiny of private insurance is improving value and helping to get excess costs out of the system," he added.

Under the law, called the Patient Protection and Affordable Care Act, health insurers must spend at least 80 percent of premium revenues on health expenses and quality improvements. The rule is intended to limit what insurers devote to marketing, administration and profits.

Kaiser found that some of the biggest rebate payouts are expected in states, including Texas and Florida, where the law faces some of its stiffest opposition from Republican politicians and other conservatives.

The study's overall projection parallels separate findings by investment bank Goldman Sachs, which estimated this week that the $850 billion health insurance industry would pay out about $1.2 billion in rebates on 2011 premiums.

Goldman said just over half that sum - $600 million to $650 million - can be expected from four major health insurers: United Healthcare Group Inc, WellPoint Inc, Aetna Inc and Coventry Health Care Inc.

The bank said its forecast was lower than the $1.4 billion initially predicted by the administration, partly because the government adopted a more industry-friendly policy than anticipated but also because of proactive pricing by insurers.

"The latter dynamic has arguably contributed to the recent increase in industry price competition," Goldman said.

Kaiser also found that 31 percent of consumers in the individual insurance market could expect to receive a total of $426 million in rebates, for an average of $127 per person.

About 20 percent of the insurance industry's market for large employers could receive $541 million, while more than one-quarter of the small group market that serves small businesses could look forward to rebates totaling $377 million.

A main source of public dislike for healthcare law is a provision that requires most Americans to buy private health insurance by 2014 as part of a plan to extend health coverage to more than 32 million people who are uninsured.

Reform advocates insist that much of the public's dislike for the law stems from a lack of knowledge about the advantages it offers to consumers and others.

(Editing by Mohammad Zargham)

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Health insurance rebates on the way

Thanks to a provision in the health care reform law, millions of consumers will be receiving rebates from their insurers this summer.

By Aug. 1, insurers that failed to meet one of the early guidelines of the Affordable Care Act are going to issue rebates averaging $127 to certain policyholders, according to estimates from the Kaiser Family Foundation.

Last year, the Affordable Care Act started requiring health insurers to spend a certain percentage of the premium payments they receive toward patient care, such as doctor's visits and hospital stays, and quality improvement activities, including discounted gym memberships or wellness brochures, instead of things like administrative and marketing costs.

Under the law, large employer-sponsored plans must spend 85% of a policyholders' premiums this way, while insurance companies that cover individuals and small businesses have to spend at least 80%. If an insurer fails to meet that threshold, they must issue a refund.

Based on insurers' recent filings to the National Association of Insurance Commissioners, those rebates will total $1.3 billion altogether this year, according to Kaiser.

What health care reform is (and isn't) doing now

A large share of this money, or $426 million, will go to consumers who bought their own insurance through one of 215 plans. Nationwide, these consumers -- roughly 3.4 million people -- will each receive an average rebate of $127, Kaiser said in its report.

Most likely, they will receive a check in the mail, although the rebate could be issued as a discount on future premiums. Actual amounts will vary by insurer, by state and the extent to which the insurer fell below the threshold, Kaiser said.

In some states, like Alaska and Maryland, the average rebate is estimated to be near $300, while in New Mexico and Maine, the average rebate will be just $1 (not even enough for the insurer to issue a check).

Those insured through a private employer or a state or local government plan could see nothing at all. Those rebates will mostly go to the group policy holder, although the money could be passed on to employees who contributed a portion of their paycheck to their premium last year.

Kaiser calculated the averages based on insurers' early estimates. Actual rebates will be based on the reports the insurance companies submit to the federal government later this summer, Kaiser said.

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Report: Health care law rebates to top $1B

WASHINGTON (AP) — Insurance companies will have to return more than $1 billion this year to consumers and businesses, thanks to a new requirement in President Barack Obama's health care overhaul, a report released Thursday concludes.

That's real money, says Larry Levitt of the Kaiser Family Foundation, which analyzed industry filings with state insurance commissioners. The law requires insurers to spend at least 80 percent of the premiums they collect on medical care and quality improvements — or issue rebates to policyholders.

"This is one of the most tangible benefits of the health reform law that consumers will have seen to date," said Levitt, an expert on private health insurance. The nonpartisan foundation is an information clearinghouse on the nation's health care system, and its research is widely cited.

The report comes with a caveat. It lacks data on the nation's most populous state, California, because complete filings there were not available. Nonetheless, the analysis estimates that consumers and businesses in other states will receive rebates of $1.3 billion, in some cases in the form of a discount on next year's premiums.

The insurance industry says consumers should take little comfort from the rebates, because the companies expect premiums to go up overall as a result of new benefits and other requirements of the new law.

"The net of all the requirements will be an increase in costs for consumers," said Robert Zirkelbach, spokesman for America's Health Insurance Plans, the main industry trade group.

"Given that health care costs are inherently unpredictable, it's not surprising that some plans will be paying rebates to policyholders in certain markets," Zirkelbach added.

But backers of the rebate requirement say it will keep the industry from padding its profits at the expense of unwitting consumers. They say an efficiently-run insurer should not have any problem earning a healthy return after devoting 80 percent of premiums to medical care. Indeed, the law sets an 85 percent requirement for plans that serve large employers.

"Millions are benefiting because health insurance companies are spending less money on executive salaries and administrative costs, and more on patient care," said Sen. Jay Rockefeller, D-W.Va., a leading advocate of the rebate provision.

The study found the largest rebates will go to consumers and employers in Texas ($186 million) and Florida ($149 million), where Govs. Rick Perry and Rick Scott, respectively, have been among the staunchest opponents of the federal law. Both states applied for waivers from the 80-percent requirement and were turned down. Hawaii is the only state in which insurers are not expected to issue a rebate.

Here's how the rebates break down nationally:

More than 3 million individual policyholders will reap rebates of $426 million, averaging $127 apiece. Consumers in Texas, Oklahoma, South Carolina and Arizona are most likely to be eligible for the payments, due starting in August, from 215 insurance plans that did not meet the standards in the law.

In the small-employer market, plans covering nearly 5 million people will receive rebates totaling $377 million.

The study found that plans in the large employer market were more likely to be in compliance with the law's requirement. Nonetheless, 125 plans covering 7.5 million people reported to state regulators that they will give back a total of $541 million.

The report says the rebates are only one of the ways in which consumers may benefit from tighter scrutiny of the health insurance industry under the federal law, which provides funding for state regulators to monitor the companies more closely. Self-conscious insurers may be hesitating to push state regulators for premium increases as large as they were able to win in the past.

"This 'sentinel' effect on premiums has likely produced more savings for consumers and employers than the rebates themselves," the report said.

Fly-speck scrutiny of the insurance industry won't solve the problem of rising health care costs, the report acknowledged, but it "can help to ensure that consumers and businesses get greater value for their premium dollar."

The numbers in the report are estimates. Final totals won't be issued by the federal government until early summer.

Seventeen states applied for waivers from the 80-percent standard, producing evidence that it would destabilize their private health insurance markets. Federal regulators granted adjustments to seven states, usually meeting each state's request part way.

The future of the rebate requirement is uncertain, pending a decision by the Supreme Court on the constitutionality of Obama's law.

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