Obamacare’ To Yield $1.3 Billion In Rebates For Consumers

by:  Sahil Kapur- April 26, 2012, 1:30 PM 603995

A lesser-known but important provision in “Obamacare” that regulates how health insurance companies spend their money is yielding benefits for consumers, a new study finds.

By this August, insurers are projected to send consumers a total of $1.3 billion in rebates, according to a Kaiser Family Foundation analysis released Thursday — $541 million to large employers, $377 million to small businesses and $426 million to people with their own insurance plans.

The rebates are the result of a rule in the Affordable Care Act that requires insurance companies to spend at least 80 percent or 85 percent of premium earnings on health care — as opposed to marketing and administrative activities — or otherwise provide rebates to their consumers.

White House spokesman Jay Carney highlighted the figures at the top of his press conference Thursday as “yet another sign of how the Affordable Care Act is already strengthening the health care system for millions of Americans.”

It’s the latest salvo in the ongoing partisan tug-of-war — one that’s expected to continue through the election — where Democrats take every opportunity to tout the law’s benefits and Republicans seize on unfavorable reports to paint it in a negative light. The law is expected to loom large in the 2012 election and Republicans have the upper hand when it comes to public opinion.

A Senate report prepared by Democrats estimated last year that the rebates would have been as high as $2 billion if the so-called Medical Loss Ratio provision took effect in 2010.

The insurance industry has rebelled against the MLR requirement and maintained that the rule would ultimately do more harm than good.

“Given the inherently unpredictable nature of health care costs, it is not surprising that some health plans expect to pay rebates to consumers in certain markets,” said Robert Zirkelbach, spokesman for America’s Health Insurance Plans. “However, the coverage disruptions and other unintended consequences of imposing a new arbitrary federal cap on health plan administrative costs are likely to outweigh any benefit these rebates will provide to consumers.”

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