• Almost $12M on the way in health insurance refunds, thanks to Affordable Care Act

    Posted on August 6, 2014 by in Breaking News

    Life Insurance, Medicare, CJB InsuranceSacramento Business Journal by Kathy Robertson –

    July 24, 2014:

    Individuals and businesses in California will get almost $12 million in refunds from health insurers this summer because of the Affordable Care Act.

    The health reform law requires health plans that cover individuals and small businesses to spend at least 80 cents of every premium dollar on direct services and other programs to improve care.

    The requirement goes up to 85 cents on the dollar for large business clients. Federal law requires rebates to be sent by Aug. 1.

    The largest amount owed for fiscal year 2013-14 — almost $3.8 million — will go to small employers signed up with Blue Cross of California.

    Nippon Life Insurance Co. of America owes $3.4 million to large employers; UnitedHealthcare, almost $1.5 million to small employers and Kaiser Permanente owes $1.4 million to individuals. Other amounts owed by other plans are much smaller.

    Nationwide, more than $332 million in refunds will be paid out this summer.

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

    A total of 490,052 consumers in California will share the total refund amount of $11,902,850, averaging $39 per family.

    The money will be paid out in a variety of ways, including a rebate in the mail, lump-sum reimbursement to a credit card or debit card or reduction in premiums.

    Employers can pass on the rebates or use them to improve coverage.

    The California total is considerably less than last year, when $65 million in refunds was paid. More than half that amount — $38.2 million — came from Blue Shield of California. The company met the rule this time and didn’t make the list of refunds owed.

    The downward trend overall suggests health plans are doing a better job accurately estimating medical costs, Charles Bacchi, executive vice president for the California Association of Health Plans, said in a news release.

    “The trend serves as evidence of health plans’ efforts to hold down costs and meet and exceed stringent federal and state requirements, ensuring the bulk of premiums are spent on medical care,” Bacchi added.

    Predicting the cost of care is an inexact science, though. There are many variables that can cause actual costs to be higher or lower then expected, Blue Cross said in a statement.

    Blue Cross spent less than anticipated on medical claims in one portion of the business: the small group market. Utilization of health care services is one of “those hard-to predict” variables, the company said.

    Kaiser did well in the employer markets but came in below the threshold in the individual market in California, spokesman John Nelson said. This represents less than 1 percent of Kaiser’s 9.3 million members.

    “In this case, these were relatively new products, with a small population, resulting in claims costs that were difficult to predict,” Nelson explained. Medical costs came in lower than expected, so 46,460 individual members will get refunds. The average amount is estimated to be $30.20.

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