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has proved unpopular with many voters and could be struck down by the U.S. Supreme Court by the end of June or repealed next year if Republicans gain control of the Congress and White House in the November elections.
If the law were overturned or repealed, insurers would no longer be required to comply with the rebate provision.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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