Health insurers are issuing $61 million in rebates for spending too much on overhead
It’s called the 80/20 rule.
Under the Affordable Care Act, health insurance companies must spend at least 80 cents of every premium dollar on actual medical costs and less than 20 cents on administration.
For plans issued through large employers, it’s actually the 85/15 rule.
“We operated at 83.5 percent,” said Dan Rachfalski of Independence Blue Cross.
Now the insurer is mailing out $17.8 million in rebates. Independence Blue Cross says 145,000 subscribers in the Philadelphia area will be affected, with rebates averaging about $110.
But don’t be expecting a crisp check in the mailbox, Rachfalski cautions. The rebates are being sent to employers, who then have to divvy it up according to various labor regulations.
“Arbitrary cap”?
It’s a scenario that’s unfolding across the nation.
In Pennsylvania, New Jersey and Delaware, insurance companies are refunding a total of $61.1 million ahead of an Aug. 1 deadline. Nationwide, total rebates top $1.1 billion.
But not everyone sees it as an unexpected windfall.
Robert Zirkelbach, of the trade group America’s Health Insurance Plans (AHIP), says the 80/20 rule is bad policy.
“Placing an arbitrary cap on health plan administrative costs does nothing to make health care coverage more affordable,” says Zirkelbach.
AHIP says limiting administrative costs could stifle an array of services patients want. Zirkelbach says providing online and mobile access to health records is included in that 20 percent, along with efforts to prevent fraud.
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