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Health insurers make premium paybacks

Gregory Warner Apr 26, 2012

Tess Vigeland: So maybe you didn’t get a tax refund this year, but another check may be headed your way. Part of the health care reform law says only a certain percentage of what we pay in premiums can go to things like insurance company profits and administrative costs. Everything else has to be spent on actual health care or we get it back.

And in the first year of the program, we’re getting back more than a billion dollars. From our Health Desk at WHYY in Philadelphia, Marketplace’s Gregory Warner reports.

Dan Harrison: Hi this is Dan!

Dan Harrison of Colorado is my first guest on a game I’ll call “Guess Your Rebate.”

Harrison: OK.

Figure Dan spends $700 a month on a high deductible health plan for his family of four. Under the health care law, only 20 percent of that can go to profits and administration. So how much of a rebate can Dan expect? Dan?

Harrison: They were probably pocketing a couple hundred bucks a month out of me so that would be more like, you know, $2,000 or something.


So the average rebate in Colorado for people buying their own policy? $55.

Harrison: $55?

Nationwide, the average rebate was $127, according to a study by Larry Levitt of the Kaiser Family Foundation. Though he says that consumers actually saved more than that by getting cheaper policies in the first place.

Larry Levitt: Insurers knew they were going to have to pay these rebates if they didn’t hit spending targets. And many of them held premiums down as a result.

Most insurance companies expect to owe no rebates. Those that do are likely in states with less regulation or less competition. Texas insurers expect to give back $127 million. That’s 12 times New York.

Levitt: If you were in a market where you were a monopoly or near monopoly you could demand higher premiums and consumers and employers didn’t have much choice.

Back in Washington insurance companies are on the hunt for more wiggle room. They’re still arguing that paying a broker to sell policies is a medical cost. If they win that fight, rebates next year could be a lot smaller.

In Philadelphia, I’m Gregory Warner for Marketplace.

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