Health care reform equals rebates in Texas

Texans with health care insurance and Texas employers who pay all or part of their employees' health care insurance premiums will receive the highest amount of rebates from insurance companies this year under a little-known provision of the health care reform law that went into effect last year, a report from the Kaiser Family Foundation released Thursday states.

Not all Texans with health insurance and employers offering health insurance to workers will get rebates, but those that do will divide $186 million in rebates this year, the highest amount among states. Nationally, $1.3 billion in rebates will be issued by Aug. 1, according to a foundation estimate.

Individuals holding their own policies in Texas are expected to receive an average rebate of $193.53, the foundation estimated. Nationally, that average is $127.

Under the Affordable Care Act, health care insurance companies are limited in the percent of premium revenues that can be used for administrative and marketing costs and profits — 15 percent for large-group insurance programs and 20 percent for small-group insurance plans.

The rest of insurance premiums must be spent on health care expenses. Amounts over the limits for administrative costs and profits must be rebated to customers.

Eleven insurers that sell policies to individuals in Texas exceeded the limits on administrative costs and profits. So far, five Texas insurers selling small-group policies to companies and five Texas insurers selling large-group policies will be paying rebates, the Kaiser report states. The foundation and its report did not reveal names of insurance companies that will be sending rebates, and all figures are preliminary since some companies have not yet filed their 2011 results.

So far in Texas, 35 percent of businesses that have large-group employer-sponsored plans will receive rebates, and 36 percent of businesses with small-group employer-sponsored plans will receive rebates, according to foundation.

“This is one of the most tangible benefits of the health reform law that consumers will have seen to date,” said Larry Levitt, an expert on private insurance with the Kaiser Family Foundation, which analyzed industry filings with state health insurance commissioners to produce its report. Kaiser is a nonpartisan information clearinghouse on the nation's health care system.

Still, the insurance industry says consumers should take little comfort from the rebates because premiums are likely to go up overall as a result of new benefits and other requirements of the law.

More Information The Kaiser Family Foundation report Rebate breakdown Rebates totaling $1.3 billion from health insurance companies should go to more than 3 million individual policyholders and thousands of employers this year because of President Barack Obama’s health care law, a report from the Kaiser Family Foundation says. • Almost one-third of consumers in the individual market will get rebates averaging $127. These are consumers who are not covered by an employer and purchase their policies directly from an insurance company. • Average amounts for those in the individual market will vary significantly by state. The highest will be paid to consumers in Alaska (average of $305), Maryland ($294) and Pennsylvania ($243). On the opposite side of the scale, no individual market insurers in Hawaii, Maine and Washington, D.C., expect to issue rebates. • Nationwide, rebates to individual consumers will total $426 million. • In the small-employer market, 146 insurance plans covering nearly 5 million workers and dependents will issue $377 million in refunds. • In the large-employer market, 125 plans covering 7.5 million workers and dependents will issue $541 million in rebates. • It’s unclear how employers and employees will split the rebates, if they even do so. Employers also might opt for a discount on next year’s premiums for employees. Source: Associated Press

“The net of all the requirements will be an increase in costs for consumers,” said Robert Zirkelbach, spokesman for America's Health Insurance Plans, the main industry trade group.

But the Kaiser report said the rebate requirement may be acting as a brake on the industry, discouraging insurers from seeking big premium increases to avoid issuing refunds later and facing possible criticism.

The study found that most rebates will go to consumers and employers in Texas ($186 million) and Florida ($149 million), where Govs. Rick Perry and Rick Scott have been among the staunchest opponents of the federal law. Both states applied for waivers from the 80 percent requirement and were turned down. Hawaii is the only state in which insurers are not expected to issue a rebate.

Rebates to those employers who offer health insurance plans will be sent to the businesses. Businesses that pay 100 percent of the premiums for their employees will keep the rebates. If employers and employees share the cost of the premiums, the rebates are to be split based on the percentages paid by each.

Whether employees will be paid the rebates directly or be given discounts for next year's premiums is an issue still being worked out, said Cynthia Cox, a Kaiser fellow and a report author.

Texans are receiving the highest amount of rebates in the nation partly because of the state's large population and a high number of insurers, Cox said. The foundation does not know if other factors account for the large amounts of rebates, she added.

“The Texas Department of Insurance is reviewing the report,” said TDI spokesman Jerry Hagins. “It would be premature for us to comment on the specifics. The actual rebates are yet to be determined.”

The provision and the rebates may come to a sudden halt if the U.S. Supreme Court strikes down the Affordable Care Act in the coming months after hearing arguments about the law's constitutionality earlier this spring, Cox said.

The future of the provision would depend on whether Congress reauthorizes the medical expense ratio limits if the entire law is nullified by the high court, she said.

dhendricks@express-news.net

The Associated Press contributed to this report.