Health Insurers to Pay $1.1 Billion in Rebates

U.S. health insurance companies are due to pay out $1.1 billion in rebates to employers and individuals this summer, under a new industry regulation imposed by President Barack Obama's health care law, the administration said on Thursday.

June 21, 2012

* Rebates from plans covering 12.8 million beneficiaries

* No word on how many would receive direct payments

* Plans covering 67 million people met new reform standard

(Adds market breakdown and payments by states)

WASHINGTON, June 21 - U.S. health insurance companies are due to pay out $1.1 billion in rebates to employers and individuals this summer, under a new industry regulation imposed by President Barack Obama's health care law, the administration said on Thursday.

But whether the rebates actually reach those recipients depends on if the U.S. Supreme Court strikes down the 2010 Patient Protection and Affordable Care Act in a ruling expected by the end of next week, experts said.

Twenty-six U.S. states have asked the high court to overturn Obama's reforms on grounds that they exceed the federal government's constitutional authority. If the court decides not to uphold the law, it could overturn the entire legislation or selected provisions.

The U.S. Department of Health and Human Services, which has kept up a steady drum beat of announcements about the law's benefits for consumers ahead of the court ruling, said rebates due by Aug. 1 would be paid out by health insurance plans that cover 12.8 million beneficiaries in the individual and group markets.

HHS officials could not fully estimate how many of those beneficiaries would receive an actual check from their insurers. They also could not identify specific insurers that would be required to provide rebates.

Just over $700 million in rebates, or nearly two-thirds of the $1.1 billion total, will be paid by insurance plans in the group markets for small and large employers. The remaining one-third comes from insurers in the individual market.

The rebates stem from a provision of the healthcare law that requires insurers to spend at least 80 percent of premiums on medical care or quality improvements, rather than advertising and administrative costs, salaries or bonuses. Insurers that devote less to actual healthcare services must pay customers the difference.

About 4.1 million people who are covered by individual insurance plans would receive a direct rebate, which HHS said would average $152 per family.

But the remaining 8.7 million beneficiaries are covered through the small and large employer markets and would receive only a portion of the rebate value depending on their share of premium costs. Officials said employers may choose to pass along the value of the rebate due their employees in forms other than cash, such as lower premiums or added benefits.

Insurance plans covering 67 million beneficiaries met the standard this year, HHS said.

The $1.1 billion total is below earlier independent forecasts of between $1.2 billion and $1.3 billion.

Independent experts attributed the difference to insurance industry adjustments and the ongoing effects of joblessness and economic weakness that have slowed the growth of healthcare costs to historically low levels in recent years.

Rebates worth over $500 per family on average are due beneficiaries in 10 states, six of which are among those suing to have the law overturned, according to HHS data.

The rebates are among a handful of consumer benefits set in place by the Affordable Care Act before Jan. 1, 2014, when it is scheduled to come into full force.

Others include a rule that allows adult children to remain on their parents' health plans until age 26, prescription drug discounts for senior citizens and health coverage for about 60,000 people with preexisting conditions.

Those benefits could also be vulnerable if the Supreme Court ruling proved unfavorable to the law.

(Reporting By David Morgan; Editing by Bernard Orr and Tim Dobbyn)