NPR

Affordable Care Act's Insurance Rebates In The Mail

Robert Siegel talks with Julie Rovner about an immediate effect of the new health care law — rebate checks — how they vary, and why some insurers owe Americans money.

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Transcript

AUDIE CORNISH, HOST:

It's ALL THINGS CONSIDERED from NPR News. I'm Audie Cornish.

ROBERT SIEGEL, HOST:

I'm Robert Siegel and you know that old saying, the check is in the mail? Well, an estimated 12.8 million Americans will be getting either a check in the mail or a rebate at the office over the next week or so, courtesy of the federal health care law, the Affordable Care Act.

The timing is no accident. Democrats who wrote the law wanted to make sure that some of the first tangible benefits for people who have health insurance arrived before election day.

We've asked NPR health policy correspondent, Julie Rovner, to explain what this is all about. Hi, Julie.

JULIE ROVNER, BYLINE: Hi, Robert.

SIEGEL: And what are these checks for, exactly?

ROVNER: Well, they're the result of new rules called a real mouthful, something they call the medical loss ratio. The Obama administration calls it the 80-20 rule, but what it really means is that, for the first time in 2011, health insurance companies were required to spend a majority of every premium dollar, 80 or 85 cents, on actual medical care rather than administrative overhead or marketing or profit.

SIEGEL: And if the companies failed to reach those targets last year?

ROVNER: Well, they had to report that back to the federal government by last June 1st and then, by August 1st, which is next week, they have to return the excess in the form of rebate checks. Now, those checks have to either go directly to consumers for people who buy their own insurance or to employers for people who get their insurance at work.

But, for those who get their insurance at work, the insurers have to send a letter to every single policyholder explaining that they failed to meet the target and that a rebate's being paid on their behalf to the employer. In fact, here at NPR, those of us who are insured through Cigna got one of those letters this week.

SIEGEL: Now, if the insurance company pays the rebate to the employer, what happens to that money?

ROVNER: Well, the employer has a couple of options. They can pay the employees back their share of the premiums. They can apply the savings to reduce future premiums or they can apply the rebate in something called a manner that benefits the employees. At least, that's what the law says.

SIEGEL: And how much money are we talking about?

ROVNER: Well, according to the Department of Health and Human Services, insurance companies are going to have to return a little over $1.1 billion to consumers this summer. The average family getting a rebate - and not everybody's going to get one, of course - will get about $150. In some states, the average rebate's a lot higher. In Vermont, some insurers that missed the mark will be redistributing an average of more than $800. In Georgia, some rebates will also average more than $800, and the average rebate for individuals in Mississippi is just over $650, so it depends where you live and what kind of insurance you have.

SIEGEL: Now, the timing of these checks - as I said, this is not a coincidence.

ROVNER: No, not at all. This is a major piece of the effort by the sponsors of this law to try to demonstrate that the Affordable Care Act is about more than just helping people who don't have health insurance get it. It's also about making insurance more affordable for people who do already have it. So this is a very public and tangible effort to ensure that insurance companies don't spend too much money on what's considered - at least for the purposes of this law - to be excessive administrative costs and profits. And the fact that the first checks are going out just a few months before the election is, I imagine, quite on purpose.

There's a lot more of this law that has yet to roll out, but this was one of the few things that they were able to get up and running to show the average policyholder that the law is attempting to help them.

SIEGEL: But if the Obama administration has essentially set itself up with this campaign gift to policyholders, it hasn't used it that much, has it?

ROVNER: No. It really hasn't. You know, since the Supreme Court upheld the health law last month, the president has really only mentioned it kind of in passing on the stump. That may be because most polls show the public is kind of tired of the whole health care debate, but this is a chance for the administration to tout something that will help a big bunch of people, even if only a little bit. We'll see to what extent they try to use it.

SIEGEL: OK. Thank you, Julie.

ROVNER: Thank you.

SIEGEL: That's NPR health policy correspondent Julie Rovner. Transcript provided by NPR, Copyright NPR.

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