Health insurance companies sending smaller rebate checks this year

Consumers and businesses nationwide can expect to receive about $500 million in health insurance rebates this week. That’s a significant drop from the total amount sent out last year, which was $1.1 billion.

Under the Affordable Care Act, insurance companies are required to spend 80 percent of each health premium on actual insurance costs – and no more than 20 percent on administrative costs. If this ratio – known as the medical loss ration (MLR) or the 80/20 rule – is not met, the insurer must issue a rebate.

In the second year the rule has been in effect, insurance companies on the whole have made adjustments to ensure lower rebate rates.

Last year, rebates from popular insurer Independence Blue Cross touched 145,000 subscribers in the Philadelphia area alone, but this year they’re not rebating any businesses in the whole state of Pennsylvania.

“We are pleased to report that Independence Blue Cross met all MLR requirements in Pennsylvania and New Jersey and did not issue rebates to lines of business in these states,” according to an IBX statement. “Independence Blue Cross fell below the MLR requirements for large-group Delaware business and will issue less than $750,000 to Delaware customers.”

And IBX is not alone. Another insurer, Cigna, paid out about $76.3 million in 2012, but owes only $12.3 million this year. Cigna is issuing no rebates in Pennsylvania, Delaware or New Jersey, citing improved predictions of what this year’s claims would look like.

Robert Zirkelbach, spokesperson for the national trade association America’s Health Insurance Plans, says he does not know the specifics of how companies decreased their rebates. But he says he thinks the 80-20 rule focuses on the wrong problem.

“If we want to make health-care coverage more affordable, the focus needs to be on those underlying drivers that drive premium increases. And the data’s clear it’s not health plan administrative costs and profits that are contributing to those increases,” Zirkelbach said.

He says the rebates amounts will be exceeded by a $160 hike in premium costs for individuals following the implementation of $8 billion tax on health insurance in 2014.

Rebates are due Aug. 1; in the Pennsylvania, New Jersey and Delaware region, about $19 million will be mailed -– down from about $60 million last year.