Californians To Receive Health Insurance Rebates, But Some Call It Chump Change

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Nearly 500,000 consumers across California will receive a piece of a $12 million refund from health insurance companies this summer as part of a provision under the Affordable Care Act, the U.S. Department of Health and Human Services said Thursday.

Called the 80/20 rule or Medical Loss Ratio Rule the provision requires insurance companies to spend at least 80 percent of premium dollars on patient care and quality improvement. But if insurers spend too much on profits and red tape, consumers are owed a refund. That includes individuals and those covered under group markets.

Statewide, nine health insurers will pay a share of the $12 million total either to individuals or those within the small or large group market. For example, Kaiser Permanente is expected to pay out $1.5 million to individual consumers, while Blue Cross of California owes $3.8 million to those in the small group market.

The average refund in California will be about $39 per family, federal officials said.

Nationwide, the rebate total continues to decrease while premium savings continue to increase, a result of the provision that went into effect in 2011, federal officials said.

At that time, health insurers owed Americans $1 billion in refunds, compared with $322 million in 2013.

“The 80/20 rule is bringing transparency and competition to the insurance market, ensuring that consumers are continuing to receive value for their premium dollars,” said U.S. Health and Human Services Secretary Sylvia Burwell in a statement. “Standards like these created under the health care law are providing Californians with immediate savings and are helping to keep costs down over the long term.”

The trend in lower rebates can be seen in California which means insurers are better at estimating medical costs, said Charles Bacchi, executive vice president of the California Association of Health Plans.

California has led the nation in the implementation of health care reform and the numbers released today illustrate effective consumer protections and show that the system is working,” Bacchi said.

But at least one group, Consumer Watchdog, a Santa Monica based nonprofit coalition of attorneys, advocates and nurses, called that $39 refund check chump change.

What those refund reductions mean is that insurance companies have learned how to maximize their profits, said Jamie Court, president for the group.

“That’s a tiny bit of money,” Court said of the refund. “It’s clear that Californians are owed tons of money. This is an insult.”

Court said data culled by Consumer Watchdog show that a million Californians faced unreasonable premium rates totaling $251 million.

Court said that’s why Proposition 45, the group’s ballot initiative that will be placed in front of voters come Nov. 4, would give the state’s insurance commissioner authority to review proposed health insurance premium rate increases and determine whether they are justified. California is one of 15 states nationwide that has no such regulation in place.

Opponents of Proposition 45, meanwhile, said the measure could damage negotiations between Covered California, the state’s health plan exchange, and insurers, among other concerns.

The 80/20 rule was one of several reforms created under the federal health law, known as Obamacare, to slow the growth of premium costs. But there are no guarantees that those costs will remain low in the long term, Bacchi hinted in his statement.

“While today’s numbers are a positive sign for our nation’s health care, many factors impact the underlying costs of care and we must continue to focus on issues, such as high cost specialty drugs, that could disrupt the progress we’ve made,” Bacchi said.

Refunds are expected to go out on Aug. 1 either as a check in the mail, a lump-sum reimbursement to the same account that they used to pay the premium if by credit or debit card; a reduction in their future premiums; or their employer using refunds to improve their health coverage, according to the feds.

Reach the author at [email protected] or follow Susan on Twitter: @sabramLA.

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