US health insurers to pay $1.3 bln in rebates, study finds

Thu Apr 26, 2012 10:00am EDT

* Sign of tangible benefits for consumers, employers-study

* Rebates seen for large segments of key insurance markets

* Supreme Court to rule on law by end of June

By David Morgan

WASHINGTON, April 26 (Reuters) - U.S. health insurers will pay $1.3 billion in rebates to consumers and employers this year under a provision of President Barack Obama's healthcare reform law that penalizes plans that devote too little of their premium revenues to health services, an independent study showed on Thursday.

The study, published by the nonpartisan Kaiser Family Foundation, said the data illustrated some of the tangible benefits that consumers and employers could expect from the embattled 2010 reform law if it survives two major legal and political election-year challenges.

Under the law, called the Patient Protection and Affordable Care Act, health insurers must spend at least 80 percentage of premium revenues on health expenses and quality improvements. The rule is intended to limit the amount the $850 billion health insurance industry devotes to marketing, administration and profits.

Kaiser, a nonprofit healthcare research group, found that 31 percent of consumers in the individual insurance market could expect to receive a total of $426 million in rebates on 2011 premiums, for an average of $127 per person.

About 20 percent of the insurance industry's market for large employers could receive $541 million, while more than one-quarter of the small group market that serves small businesses could look forward to rebates totaling $377 million.

The rebates are due by Aug. 1 and most of the money is expected to go to employers rather than consumers.

The healthcare law has proved unpopular with many voters and could be struck down by the U.S. Supreme Court by the end of June or repealed next year if Republicans gain control of the Congress and White House in the November election. If the high court overturned the law, insurers would no longer be required to comply with the rebate provision.

A main target for public dislike is a reform provision that requires most Americans to buy private health insurance by 2014 as part of a plan to extend health coverage to more than 32 million people who are uninsured.

Reform advocates insist that much of the public's dislike for the law stems from a lack of knowledge about the advantages it offers to consumers and others.

Some of the biggest rebate payouts are expected in states, including Texas and Florida, where the reform law faces some of its stiffest opposition from Republican politicians and other conservatives.

"While the health reform law as a whole continues to divide the American public, there are tangible changes taking place that benefit consumers," said Kaiser President Drew Altman.

"Greater regulatory scrutiny of private insurance is improving value and helping to get excess costs out of the system," he added.

The Kaiser study is based on insurer filings to the standard-setting National Association of Insurance Commissioners and includes rebates already paid and insurer estimates of planned payments on 2011 premium revenues.