Health insurance refunds – your questions answered

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By Consumers Union on Wednesday, June 20th, 2012

Recently, we posted our map listing insurance companies that may owe refunds to customers because they wasted too much money on overhead according to the new health care law.  But how do you know if you qualify for a refund?  What types of plans get what refunds?  And what if you are on public benefits?  Read on to get the facts about the new rebates.

The Basics

First of all, in order to be eligible for a rebate you have to be enrolled in an individual, small group, or large group private health insurance plan. Talk to your insurance provider or your employer’s HR department in order to determine what kind of plan you have.

Customers are given refunds when their private insurance company spends too much money on average on overhead and profits and not enough money paying medical bills.  If you have a small group or individual plan the company can only spend 20 percent of premiums on administrative expenses.  If you have a large group plan, the ratio is even less, with employers only allowed to spend 15 percent of premiums on administrative overhead.

In six states, (North Carolina, New Hampshire, Nevada, Maine, Georgia, Kentucky, and Iowa) insurers are allowed to meet a slightly lower medical loss ratio in order to keep from destabilizing those insurance markets.

When did this new law go into effect?

This new requirement was created by the Affordable Care Act (ACA), the new health care law. This new rule took effect in January 2011 so this is the first year that rebates are being paid. Rebates paid this summer are based on  health insurance you had in 2011. Although insurance companies may have spent more than 20% of premiums on overhead in years prior to 2011, they do not owe refunds for those years.

What about Medicare?

Traditional Medicare parts A & B operate very efficiently spending just 3 percent on overhead, therefore Medicare is not subject to the new refund rule.

Medicare supplemental plans (AKA Medigap) must meet a medical loss ratio of 65 percent for the individual market and 75 percent for the group market.  These plans are required to give rebates as well, but in recent years Medigap plans have spent over 80% of premiums on medical care on average.

Beginning in 2014, all Medicare Advantage plans will be required to maintain an MLR of at least 85%.  Plans that do not maintain at least an 85% MLR will be required to refund the federal government for wasting tax-payer funds. Medicare Advantage plans that miss the requirement for three or more consecutive years must stop accepting new enrollees. Plans that fail to meet the requirement for five years will no longer be allowed to operate.

Stand-alone Medicare Part D plans (those not included as part of a Medicare Advantage plan) are not subject to a medical loss ratio requirement.

What about other public programs?

Some states have medical loss ratio requirements for Medicaid & Children’s Health Insurance Program (CHIP) when the state uses an insurance company to serve Medicaid enrollees. More information is available here.

Beneficiaries of the Veteran’s Affairs health care system and TRICARE will not receive refunds from the new requirement.

When and how will rebates be paid?

Insurance can provide rebates to customers either in the form of a refund check due by August 1 or a reduction in the first monthly premium payment following August 1.  You’re rebate will be based on your monthly premium. In most cases, employers must share refunds with their employees based on the percentage of the total premium that the employee paid. By August 1, insurers must provide a notice to customers if they are owed a rebate. Refund checks may accompany the notice or be sent separately.

I work for a very large employer, does this matter?

Many large employers are “self-insured” meaning your employer pays for your health care costs rather than having you sign up with a health insurance provider.  It’s difficult to tell if you’re in a self-insured plan because your employer probably still uses an insurance company to administer claims and receive access to discounted doctor rates so you probably still have an insurance card. Check with your HR department to find out if your plan is self-insured. These plans aren’t subject to the medical loss ratio requirement and are not eligible for refunds, however, most self-insured plans operate with as little overhead as possible to keep costs down for employers and employees.

Are these the final rebate amounts?

Consumers Union has updated the totals on the map and estimates per insurance company based on data reported by insurance companies to the U.S. Health & Human Services Department (HHS) by June 1. An earlier version of our map and list of rebating insurers used estimates reported by insurance companies to the National Association of Insurance Commissioners by April 1. Current listed rebate amounts and rebating insurers are based on information found here & here. These updated amounts vary from the earlier estimates reported by insurers. HHS characterizes the current list of insures owing rebates as “preliminary” based on information “as of June 3, 2012.”

Further, on July 13, 2012, HHS added new information to their website showing the percentage of premiums each insurer spent on actual medical care versus overhead. You can access this information by going here, entering your state and insurer, selecting MLR, and clicking on your insurance company.  Consumers Union will continue to update our data as new information becomes available.

I’m not eligible for a refund, is there anything available to help me?

Starting in 2014, the federal government will offer tax credits for middle and low-income Americans to purchase health insurance through state health “exchanges.” These exchanges will force insurers to compete for your business on a level playing field based on cost and quality. Plus, in 2014 you can’t be denied or charged more because of your health status so you can shop around for the best deal.

 

 

8 responses to “Health insurance refunds – your questions answered”

  1. glenda says:

    trying to find out about somthing and no one will help =I worked for a company from 1986-1990 had full family coverge medical ins while thire after I left was told the ins company was soposed to pay me back what i paid in tried to contact them no one helps do not remember thire name it was thu the company i worked for peterson,s inc decatur arkansas keep getting dead ends was paying 120,00 a wk can anyone help thank you and god bless

  2. Wade johnson says:

    My wife who,is and has been on Medicare since 2005 has been seeing the same Doctor,who doesn’t even take Medicare so,it’s $300 every 2 months OITTA,pocket, nit yet still, the State and federal government still,took their $120.00 off the top,then Humana got its $48.00 off the top,as well!!! So wh wouldn’t most if not all Medicare recipients also,get a refund, I mean after all the fine guy we all call our leader spends millions to,truck in his back up troops he was calling refugees so that as soon as his run in the White House is up he can ARM ALL,OF THESE SORRY AS MOTHERFUCKERS AND ORER THEM TO KILL AS MANY CHRISTIAN AMERICANS QS POSSIBLE!! And the absolute worse thing is .oir own Feds kmow what he has planned!!!! Kinda like people who,are on Social security disability can’t claim their DISQBILITY as EARNED INCIME!!! Now you tell me,,if the shit wasn’t EARNED THEN HIW THE DUCK WAS IT PAID THE FUCK IN?? We been raising our grandson since he was 2 months old but because she gets SS DISABILITY SHE DANT CLAIM HIM ON ANY KINDMIF TAXES AND GET ANY EIC !!!

    • Susan says:

      Earned income is wages, payment for labor. Social Security is insurance. It is a pool of funds contributed to by workers who pay a tax on their wages. The benefit that goes to you and or your wife will exceed the amount of money you or she personally paid in to the fund when you were employed.
      You do not say if you have other income, pension for example.
      If you have no other income the SS disability income is tax free.
      If it were “earned income” it would be fully taxable.
      If it were fully taxable you could get the EIC which is a credit that reduces your tax due, but it likely would not eliminate all your tax owed.
      Tax free beats a credit every time… If you have no other income you are ahead of the game.
      The doctor. There is no reason for you to be paying in full out of pocket. The doctor can enroll in Medicare and opt to be a non-participating doctor. This requires him to bill Medicare but not accept assignment (the Medicare allowances) which means any charges not covered by the insurance would be your responsibility. That would save you a lot of money and the doctor gets his fees paid
      Doctors can opt out completely but I would be suspect of any doctor taking that route. He could be hiding something you might want to know.
      If you are not in the wilderness, or isolated somewhere it would benefit you and your wife to find a doctor that is enrolled in Medicare. You are making him rich, at your own expense, and he is not working in your best interest. At the very least verify his status with Medicare directly. And make sure he is licensed with your state.
      http://www.aapsonline.org/cma-draft-4th-option.pdf

  3. Cierra says:

    My husband and I recieved a letter from tricare stating that our provider was overpayed. And on the 2nd letter it says refund due . do we owe money or is that for us.

  4. Jason says:

    “You’re rebate” is misspelled and should read: Your rebate.

  5. What is a claim payment for? We received a check for it.

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