Oregonians Benefit From Insurance Rebates under Affordable Care Act

In this state, about 24,000 individuals and small businesses can expect to receive $4.7 million in rebates by August 1

June 21, 2012 -- While everyone waits anxiously for the outcome of the Supreme Court decision on the Affordable Care Act, about 12.8 million Americans will receive $1.1 billion in refunds from insurance companies that overcharged them for health plan premiums last year under new rules created by the healthcare reform law, according to an announcement from the Department of Health and Human Services.

Those refunds will be paid by August 1 because of the 80/20 rule, which requires health insurers to spend no more than 20 percent of customer premiums on administration, CEO pay and profits and to use the rest for actual healthcare.

In Oregon, roughly 24,000 people will receive $4.7 million in rebates, amounting to $368 per person, based on an analysis by Health Care for America Now.

Three health insurers will pay out those rebates – LifeWise Health Plan of Oregon in the small group market and Time Insurance Company and MEGA Life and Health Insurance Company in the individual market, according to an earlier analysis by Consumers Union.

LifeWise is preparing to send rebates to 1,600 small employers. Instead of issuing a check, those employers will receive a 5 percent premium credit on their August invoice, said Deana Strunk, spokesperson. Employers who dropped coverage, however, will receive a check in the mail.

“We work hard to forecast the costs of medical services when we set premiums,” Strunk said. The services our members used was significantly lower than forecasted in 2011 resulting in less than expected claim payments, and therefore the need for a rebate. We set our rates by forecasting the costs of medical services and the number of members we anticipate will use those services. In the past year we saw less use of medical services across our business and significantly less than expected by our small group members. In recognition of this lower than expected use of medical services by our members, we sought two downward rate adjustments in 2011.”

After filing its financial reports with the Department of Health and Human Services, Health Net learned that it would not have to pay rebates to its customers. However, a deeper analysis found that was not the case. “Health Net exceeded the Affordable Care Act’s minimum medical loss ratio requirements in Oregon (as well as all the states where we have commercial plans), which means we are not required to provide
rebates,” according to its spokesman, Brad Kieffer.

From a larger perspective, Ethan Rome, executive director of Health Care for America Now, called the rebates “a big deal for families living paycheck to paycheck. While the Republicans talk about how big of a tax break to give millionaires and billionaires, the Affordable Care Act puts money in the pockets of working and middle-class families who truly need relief. For far too long, health insurance companies have been ripping off consumers, and Obamacare finally put a stop to that.

“These refunds are a powerful example of what Obamacare does for hard-working families, seniors and small business owners,” Rome said. “When the Republicans say they are against Obamacare, they’re really saying they are against helping ordinary Americans pay their bills and get the health care they need. Every consumer should know that the only reason they will get the refunds is because of Obamacare, and the
Republicans in Congress want to take those rebates away.”

HCAN has been the leading supporter of the 80/20 rule and the rebate program. Since the law was enacted, HCAN has led the fight for strong regulations to curb wasteful spending by insurers, demanded tough regulations in advocacy with the nation’s insurance commissioners, helped persuade HHS to adopt strong rules and successfully fought a waiver from the 80/20 rules sought by the state Florida to help big insurance companies.

HHS said 12.8 million people nationwide will receive $1.1 billion in rebates for their 2011 plan year. Obamacare wasn’t structured to yield refund checks from the insurers as much as it was designed to change their behavior to make refund checks unnecessary. From the amount of rebates, it’s clear that the health insurance companies still have a
way to go. The insurers that owe no rebates are the ones that have already cut wasteful spending and restrained themselves from trying to impose unjustified premium hikes.

These benefits will be stripped away if the U.S. Supreme Court overturns the health care law or the Republicans repeal it, according to HCAN. It is unclear whether consumers would have to repay the money to insurance companies if the Republicans get their way.




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