The Check's in the Mail

Healthcare Policy Expert, Robin Scott, is a contributing blogger for Protestants for the Common Good.
 

This past month, you may have received an unexpected check in the mail.  This check – a rebate from your health insurance company – is a direct result of the health reform law, the Affordable Care Act. 

Before health reform, over 20% of consumers who purchased coverage in the individual market were in plans that spent more than 30 cents of every premium dollar on administrative costs. Health insurers could spend as much money of your premium as they wanted on what they wanted. Now they must be accountable.  

Depending on the size of the insurance plan, insurers must spend at least eighty or eighty-five percent of your premium on health care and activities that improve your health, not on administrative expenses or profits. This is known as the medical loss ratio rule (MLR) rule. If your insurer doesn’t meet those standards, it must send you--or your employer if you have employer-based insurance--a rebate check. 

Even if the check goes to the employer, it will ultimately benefit you, for example through a lump-sum reimbursement or reduction in future premiums.  It can be complicated, but the good thing is most of the money you pay for health insurance will be used for health care or improving the quality of health care, rather than administrative costs and profits. 

Between January 1 and August 1, nearly 12.8 million Americans were provided with more than $1.1 billion in rebates this year due to this MLR rule.  The largest rebates have been given to consumers in Texas ($167 million) and Florida ($124 million). The average rebate per family in the U.S. is $151. The average rebate per family in Illinois is about $380. Nearly 230,000 Illinoisans will receive $62 million in rebates; about $380 per family.

However the rebate is done, health reform forces insurers to devote the lion’s share of their premiums to patient care. That’s a basic change to the business model of private insurance. And it’s happening now, because of health reform.