Health Insurance Navigator

By Lisa Zamosky

Last month, I reported on a part of the health reform law that requires insurers to send rebates to customers if they fail to spend at least 80% to 85% of the premium money they collect on medical services, as opposed to executive salaries or marketing.

Last week, the Kaiser Family Foundation came out with a report outlining the current best estimate of just how much money insurers will be sending back. In total, the Foundation reports that 215 insurance plans providing coverage to about 3.4 million people will rebate $1.3 billion this August.

Here’s how the rebates break down by market:

• $426 million will be returned to people who buy insurance on their own on the individual market
• $377 million goes back to those insured in small group plans
• $541 million will be returned to the large group market – large employers that provide insurance to their workers

Line Your Pockets

What might this mean for you personally?

If you buy your own insurance (meaning you don’t get it through your job), and your insurer collected more in premiums than the law allows, an average refund of $127 per person across the country is expected. And depending on where you live, the refund could be higher.

Here’s where the biggest refunds will go:

• Alaska – $305
• Maryland – $294
• Pennsylvania – $243
• Idaho – $241
• Mississippi – $236

If you live in New Mexico or Vermont, you can look forward to a new pack of gum this summer, courtesy of your insurer – the average refund in both states is about $1 per person. Try not to spend it all in one place!

Folks in Hawaii, Maine and Washington DC won’t see any refund. But overall, more than one in three people who buy their own insurance are expected to get a rebate.

Folks insured in the small group market (think small businesses) will see an average rebate of $76 per enrollee. And about 19% of large employers will get some money back – roughly $14 per enrollee.

Deal or No Deal?

A $1.3 billion refund sounds like a lot of money, and it is. But in the end, most of us are worried about whether or not health insurance is a product we can afford. When you look at the dollar amount of the refunds on an individual basis, that big rebate number seems decidedly less impressive.

Kathy, a reader of this blog, posted a comment the last time I wrote about insurer rebates that I think brings the issue back down to reality for most people:

“Out of pocket medical [insurance] cost me $18,000 over the last two years because of exclusions to coverage, insurance premiums, and co-payments. If my refund is $100 to $300, it will be nice, but won’t begin to replace savings or help with care I need now when I can no longer afford such insurance.”

Her thoughts were echoed in a blog written by health policy expert, Bob Laszewski. In it, he says that insurers’ first quarter earnings reports revealed that “health insurance prices are expected to rise by an average of 6% to 6.5% during the next year—well above inflation and well above wage rates. And, typically, individual and small group price increases significantly exceed a company’s average cost increases.”

He asks the question: “Does a $200 rebate on a $13,000 [annual] premium make health insurance any more affordable?”

I’m curious, readers, to hear how you would answer. Please share your thoughts in the comments section below.