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Health insurance rebates on their way to you

The Affordable Care Act has come in for a lot of criticism since President Obama signed it into law but some of its more important provisions have already come into force. So, for example, insurers can no longer refuse you cover or cancel cover because of a preexisting condition and your children can stay on your health plan until they are 26. And now comes the practical benefits of one of the other reforms. The Act gives and takes. It says if insurers will get more revenue because of the mandate, they must use not less than 80% of the money they collect in paying for health care. But for this rule, insurers would collect in more money but the same number of people would fall ill. This would simply generate more profit for the insurers. The effect of the rule is to force insurers to reduce their premium rates. If they fail to get their sums right, they must refund whatever proportion of the premiums represents the difference between what they spent and 80%.

The calculations by federal government show that $1.1 billion is to be refunded to policyholders for 2011. As a comparison, the law in Massachusetts requires insurers to spend not less than 88% on paying medical bills. Because insurers in that state underspent, the 164,000 policyholders are due to receive an average of about $140. This is going to represent something of a shock to the system. This will be the first time most people have ever received a rebate from their insurance company. To prevent this from happening again, insurance company will have to reduce the health insurance quotes they send out this year.

The arrival of these refunds is somewhat ironic because, if the Supreme Court declares the whole Act unconstitutional, you will never get another rebate again unless, that is, you live in the GOP controlled Massachusetts where Romneycare will continue in force to the benefit of citizens who live there. So let's hope the Supreme Court does not interfere with these provision that bring you cheap health insurance.


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