What’s in Obamacare, part 3:
Health insurance premium rebates
Regulations on health insurance providers to refund a set percentage of premiums:
Health insurance providers that provide group or individual policies will be required to provide an annual rebate to each member enrolled in the plan if the amount of incurred premium revenue spent on health care coverage reimbursement is less than 80% for individual and small group plans or 85% for large group plans. The rebate amount will be equal to the difference not spent up to the above mentioned percentages.
Ok, I know that may sound a bit complicated, so here’s an example. Let’s say that Acme health insurance company has a customer named Al. To keep things simple, we’ll say that Al pays a $100.00 per month premium ($1200.00 per year), and all of his out-of-pocket expenses (copays, prescriptions, etc…)are zero dollars, meaning that Acme covers 100% of his medical expenses. Over the course of the year Acme Health Insurance only spends $860.00 on Al for health care coverage, but Al paid them $1200.00. 80% of $1200.00 is $960.00. Since Acme Health Insurance company is required to either spend 80% of Al’s premium on health care for Al, or refund up to what they did not spend up to that amount, Al will get a rebate from Acme insurance company for $100.00.
What this does is require health insurance providers to operate their entire business(minus actual health care expenses) on 20% of individual premiums, and 15 % of group premiums.
It has been brought to my attention that the required rebate structure will not be based on individual policies, but rather on large blocks of insured. Therefore the rebate amount would be based on the total premium revenue brought in over a large number of policies. I have left the above example in tact, but instead of thinking of it as just one person (Al) think of it as a large group of insured.
Sections and Pages Referenced From the Bill:
H.R. 3590 Patient Protection and Affordable Care Act:
Text From the Bill:
“REQUIREMENT TO PROVIDE VALUE FOR PREMIUM PAYMENTS.
—A health insurance issuer offering group or individual health insurance coverage
shall, with respect to each plan year, provide an annual rebate to each enrollee under such coverage, on a pro rata basis, in an amount that is equal to the amount by which premium revenue expended by the
issuer on activities described in subsection (a)(3) exceeds—
H.R. 3590 Patient Protection and Affordable Care Act, Page 31