[UPDATE: An earlier version of this story incorrectly reported the estimated amount of rebates expected to be paid to health plan enrollees. The correct amount is $323 million.]
In the latest in a string of announcements about ways the Affordable Care Act is improving patients' lives, federal health officials on Thursday said some health plan enrollees will soon start receiving rebates amounting to about $323 million for the first year.
As of 2011, the health reform law requires insurance companies in the individual and small group markets to spend at least 80% of their premium dollars collected on medical care and quality improvements. For companies in the large group market, the rate is 85%, Steven Larsen, Director of the Center for Consumer Information and Insurance Oversight for the Centers for Medicare & Medicaid Services said during a telephone news conference.
The rule is commonly referred to as the medical loss ratio.
"Insurance companies not meeting the medical loss ratio standards will be required to provide rebates to their consumers," with the first round due to be paid by Aug. 1 this year, and each year thereafter. "Enrollees or consumers who are owed a rebate will either see a reduction in their premiums, or will receive a rebate check, or if the enrollee paid by credit card, a lump sum reimbursement in the same amount will be made," he said.
Also, insurers will be providing consumers with information on how the companies spent their premium dollars, for example how much went to medical care versus "administrative expenses like marketing and advertising and underwriting, salaries and bonuses."
In some cases, the rebates will go to the employers who paid the premiums, "and then the employer has obligations to pass that along to their employees."
"This is a critical measure of consumer transparency," he said.
Larsen added that federal health officials are aware that insurance plans have already begun to adjust their pricing and business models to these 80/20 or 85/15 standards.
Meanwhile HHS officials said they had denied adjustments requested by insurers in Wisconsin and North Carolina.
Consumers will be able to learn whether their insurance plans met the standard or not. More information on where to get specific information by plan is posted here.
"The proposed consumer notices about whether their insurance company has met the new standard have been posted on HealthCare.gov, and HHS is seeking public comment to help ensure the notices are useful transparency tools for consumers," HHS said in a statement.
On February 10, CMS issued a final rule designed to simplify and clarify the language used by insurance companies to describe health plan eligibility and benefits.