Health insurers will have to pay more than $1 billion in refunds to customers this summer because they have exceeded overhead and profit limits imposed by the 2010 health reform law, a new report finds.
The report, from the Kaiser Family Foundation, examined data submitted to state insurance commissioners and estimates that the rebates will total $1.3 billion for the 49 states it analyzed. (Data were not available from California.)
The health care law sets limits on how much insurance companies can pocket from premiums beyond what they spend on medical claims. For large-group plans, 85 percent of premiums must go toward health care; for individual and small-group plans, the limit is 80 percent.
Overall, the report estimates that about 31 percent of customers in the individual market, 28 percent of those in the small-group market, and 19 percent of customers in the large-group market will get refunds, which might come in the form of checks or discounts on future policies.
The report did not find an even distribution of plans that had overcharged around the country. One state, Hawaii, would have no refunds; others would have a lot. In Texas, for example, 92 percent of people insured in the individual market will be getting a refund averaging $172. Customers in other states may get higher average payouts; in Alaska, the average refund will be $305.
Earlier this month, the Commonwealth Fund published an estimate of rebates that would have been paid if the law had gone into effect in 2010 and calculated there would have been refunds totaling $2 billion.
The insurance industry said the regulation doesn't help bring down health care costs. "The new medical-loss ratio requirement does nothing to address the real driver of premium increases: the underlying cost of medical care," Americas Health Insurance Plans spokesman Robert Zirkelbach said in a statement.
“Health plans are leading the way on delivery-system reform. The MLR regulation could turn back the clock on these quality-enhancing programs, as well as fraud-prevention initiatives, while potentially inhibiting the next generation of delivery-system reforms.”