Insurance companies are expected to pay out nearly $1.3 billion in rebates this summer because they haven't complied with a provision under health care reform that they devote more money to health care and less on administrative costs and profit, according to a report by the Kaiser Family Foundation.
Marylanders will receive $37.7 million from four insurance providers, according to the report. Kaiser did not name the insurers, but said the average rebate for Marylanders will be $293.50.
The rebates will be paid by August of this year by insurers who are not following the provision that says insurers offering coverage to individuals and small businesses must devote at least 80 percent of their premium income on health care claims and "quality improvement" activities. Large group plans must spend at leat 85 percent.
The rule went into effect in 2011 and this will be the first year rebates are paid. Full implementation of health care reform is slated for 2014. But their is uncertainty as the U.S. Supreme Court debates key parts of the law.
Insurance industry group America's Health Insurance Plans criticized the provision in the following statement:
The new medical loss ratio requirement (MLR) does nothing to address the real driver of premium increases: the underlying cost of medical care. Given the inherently unpredictable nature of health care costs, it is not surprising that some health plans expect to pay rebates to consumers in certain markets. However, the coverage disruptions and other unintended consequences of imposing a new arbitrary federal cap on health plan administrative costs are likely to outweigh any benefit these rebates will provide to consumers. Moreover, the taxes, benefit mandates, and other regulations included in the health care reform law will cause premium increases that far exceed the value of prospective rebates. For example, a technical analysis by Oliver Wyman estimates that the new health insurance tax included in the ACA “will increase premiums in the insured market on average by 1.9 percent to 2.3 percent in 2014,” and by 2023 “will increase premiums 2.8 percent to 3.7 percent.”
Health care reform advocacy group Health Care for America Now said the rebates are a victory for consumers.
"For far too long, health insurance companies have been ripping off consumers, and Obamacare finally put a stop to that," the group said in a statement. "The rebate money will come to consumers from insurance companies that spent too little on medical care and too much on profit, red tape and bloated CEO pay."