Health Insurers to Return $1.3B to Policyholders Under Health Reform Rules: Kaiser

Health care plan insurers will return approximately $1.3 billion in excess profits and administrative charges to employers and individual policyholders, as required by provisions of the health care reform act, according to an analysis released last week by the Menlo Park, California-based Henry J. Kaiser Family Foundation.

Fully insured employers with more than 100 full-time employees are expected to receive a total of $541 million in rebates this year, while smaller employers will receive $377 million, according to the Kaiser Foundation report. The rest, $426 million, will be refunded to consumers who purchased health care plan coverage privately.

According to preliminary data submitted by insurers to 49 state insurance commissioners (data from California was not available), about 28 percent of fully insured small companies and 19 percent of larger firms are expected to receive rebates in 2012.

The refunds are the result of provisions of the Patient Protection and Affordable Care Act that took effect in 2011 which limit medical loss ratios, the amount of premium dollars health insurers can reserve for profit and administrative costs. According to the law, underwriters can allocate no more than 20 percent of the premium income collected from individual policyholders and small businesses and 15 percent of premium income from large employers to costs other than health care claims and care quality improvement.

Companies that fail to meet the law’s MLR requirements must refund the excess premiums.

“This study shows that asking insurance companies to put more of their premium dollar towards patient care rather than administration and profits is not only popular but also effective,” Drew Altman, Kaiser’s president and CEO, said in a statement. “There are tangible benefits for consumers and employers.”