WASHINGTON » Consumers and businesses in every state but Hawaii are expected to share in $1.3 billion in rebates from health insurers under President Barack Obama’s health care overhaul, a Kaiser Family Foundation analysis found.
The rebates should average $127 for the people who get them, and Democrats are hoping they will send an election-year message that Obama’s much-criticized health care overhaul is starting to pay dividends for consumers. Critics of the law call that wishful thinking.
The law requires insurance companies to spend at least 80 percent of the premiums they collect on medical care and quality improvement or return the difference to consumers and employers. Although many large employer plans already meet that standard, this is the first time the government has imposed the requirement on the entire health insurance industry.
"Hawaii is unique in that its market is dominated by two nonprofit insurers, both of which were already in compliance with the law," said Cynthia Cox, a fellow with the Kaiser Family Foundation and a co-author of its report.
HMSA and Kaiser already "had relatively low administrative costs, relative to national averages," she said.
Hawaii did not have such a requirement in place before the law took effect, according to Cox’s research. Insurers may have structured premiums around the requirement, "so in that case, there may be consumers benefitting by paying lower premiums," though they may not get rebates.
"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, health insurance is expensive, and $127 might not even pay a month’s worth of premiums for single coverage.
And 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.
"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.
"Given that health care costs are inherently unpredictable, it’s not surprising that some plans will be paying rebates to policyholders in certain markets," Zirkelbach added.
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 having to issue refunds later and face possible criticism.
The new law has "provided an incentive for insurers to seek lower premium increases than they would have otherwise," the report said. "This ‘sentinel’ effect on premiums has likely produced more savings for consumers and employers than the rebates themselves."
The study found the largest 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.
———
Star-Advertiser writer Erika Engle contributed to this report.
