Consumers and businesses in Wisconsin will receive about $16.8 million in rebates from health insurance companies that spent more on administrative expenses and profits than allowed by the federal health care reform Affordable Care Act, according to an analysis by the Menlo, Calif.-based Henry J. Kaiser Family Foundation.
Insures will have to pay a total of $1.3 billion in rebates nationwide, according to the report.
Beginning this year the Affordable Care Act requires insurance plans to pay out a minimum percentage of premium dollars towards health care expenses and quality improvement activities, limiting the amount spent on administrative and marketing costs and profit. Under the law, large group plans are required to spend at least 85 percent of premium dollars on health care and quality improvement. Small group plans must spend at least 80 percent.
In Wisconsin $2.59 million in rebates will be paid to 31,763 individuals who bought their own health insurance, $4.74 million in rebates will be paid to employers in the small group market with a total 167,008 people enrolled in their plans and $9.49 million in rebates will be paid to employers in the large group market with a total of 166,624 people enrolled in their plans.
Rebates in the group market will generally be provided to employers, and in some cases be passed on to employees as well. Employers may be obligated to use some or all of the rebate for the benefit of enrollees. Requirements vary under the Affordable Care Act.
“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,” said Kaiser Foundation president and chief executive officer Drew Altman. “There are tangible benefits for consumers and employers.”
But, according to a Gannett report, the industry group America’s Health Insurance Plans said that “coverage disruptions and other unintended consequences” of the new Affordable Care Act spending requirement will outweigh any benefits to consumers. The group also said that other parts of the law, including new benefits insurers will be required to provide, will cause premiums to rise more than the required rebates will lower them.
Editor’s note: Additional information about the logistics of the rebates and how they will be paid was not immediately available from federal or state officials. BizTimes plans further coverage about the rebates next week.