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Health Insurance Companies Required to Pay Back Millions to Nebraskans
August 3, 2012— Today, Nebraska’s Senator Ben Nelson said that he is pleased to see Nebraska families, consumers, and businesses continuing to receive benefits of the Affordable Care Act, most recently in the form of rebate checks – resulting from health insurance companies allocating excessive amounts of funds towards salaries, advertising, and operations, rather than direct medical care.
“There is good news from the health reform law, because it is requiring insurers to rebate $4.8 million to tens of thousands of Nebraskans,” said Senator Nelson. “These rebates aren’t pennies from heaven. Insurers owe us this money. If too many of your premium dollars were put towards salaries and advertising instead of towards your health care, the Affordable Care Act requires your insurer to pay you back.”
The Affordable Care Act (ACA), passed by Congress, signed into law by the president, and recently upheld as constitutional by the Supreme Court, contains a requirement called the medical-loss ratio (MLR), informally known as the “80/20 rule.” The rule mandates that in individual and small group health insurance markets, at least 80% of premium dollars must go into health care benefits and care improvement efforts, leaving the remainder for commissions, advertising, salaries, and general administrative expenses.
Health insurers who have not spent enough on direct health care benefits are now required by law to send rebates to their consumers by August 1 of each year.
“The 80/20 rule behind these rebates is a basic consumer protection that will provide much-needed transparency and accountability to insurers,” Nelson said. “It guarantees that Nebraska customers get more value from their premium dollars, as well as better benefits.”
In 2012 alone, insurance companies failing to meet the 80/20 rule will provide nearly 12.8 million Americans with more than $1.1 billion in rebates.
The impact of the rebates was felt strongly in Nebraska, with 46,444 total Nebraska consumers receiving the following:
- $4,832,049 in Total Rebates in All Markets for Consumers and Families
- $3,704,559 in Individual Market Rebates
- $215 in Average Rebates per Nebraska Family
- $267 in Average Rebates per Nebraska Family in the Individual Market
- $131 in Average Rebates per Nebraska Family in the Small Group Market
Nebraska customers will receive these rebates in a number of ways. Many will receive a physical rebate check in the mail, while some will get lump-sum reimbursements in their accounts used to pay premiums, and others will see the value of the rebate subtracted from future premiums.
Nelson highlighted letters that he has received from throughout Nebraska, voicing appreciation for the Affordable Care Act, and particularly the rebates stemming from the Medical Loss Ratio.
“Many Nebraskans have let me know how much they appreciate these rebates and the health reform law,” said Nelson. “Letters I’ve received note how the Medical Loss Ratio is already starting to bring down insurance costs. Quite a few people across the state like how they now get their money back if it doesn’t go towards their health care.
“The new requirement on insurers to deliver better healthcare or rebates is one of the hidden benefits of the health reform law that people are now seeing as new features of the law go into effect,” said Nelson.
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