Health Insurance Refund Coming to Millions of Americans

Posted on: July 31st, 2012 by SamTabes No Comments

POST SCRIPT UPDATE 9/25/2012 – According to Sarah Lueck’s article on, about 13 million people did receive over $1 billion in rebates on their health insurance premiums because of the provision discussed below.  This has been known as the 80/20 rule and also the medical-loss ratio rule.  There is some question about the stability of this rule in recent review.  A bill that the House Energy and Commerce Committee’s Health SubCommittee approved a few days ago could weaken this important rule as part of health care reform.  It’s possible insurance companies will not have to count commissions they pay towards agents and brokers as part of their overhead which would ultimately mean less money back in consumers’ pockets.  The bill is currently being seriously considered by the Committee.

There are many aspects of the Affordable Care Act that are up for debate, but many Americans will be pleased to hear that a refund check could be coming their way.  By August 1, 2012, health insurance companies will be refunding about $1.1 billion in premiums to approximately 12.8 million customers.  In the Affordable Care Act, the 80/20 Rule mandates that health insurance companies spend at least 80% of collected premiums on health services and about 20% on administrative costs and advertising.  So if a company only spends 78% on health services they must send rebated checks to customers for the other 2%.

The whole point to the 80/20 Rule is that customers ultimately get value for their health care premium dollars.  There is not currently a system in place to determine if you are eligible for a refund check and while the checks will average about $151 per household there is a great amount of variability.  Some households may get more, while some households get nothing.  The size of the check will depend heavily on how your specific health insurer handled collected premiums and could vary from state to state.

Insurance companies have a few options on how to get the refunds to their customers.  They can send an actual check in the mail, or they may refund credit cards that were used to pay premiums.  They may also discount future premium costs.  There is also the possibility that insurers will charge their customers more upfront, knowing they may have to send refund checks later according to the article on  This means you may never fully notice the refund that is owed to you, but at the same time, keep your eye on your mailbox over the coming weeks.

Adam Powell, a healthcare economist, is quick to point out that a refund check from an insurer does not automatically imply that the company is overcharging their customers.  There are many other factors in play determining if a health insurance refund check is available.  Customers shouldn’t assume their insurer is taking more money than they need.  It’s challenging for companies to determine an exact 80/20 placement of premiums beforehand.  Much of the math will have to be completed at the end of the year once revenue and profits are determined.

This aspect of the Affordable Care Act is one example of why the health insurance industry struggles with the new health law.  Many question how insurance companies are expected to grow with these types of restrictions placed on them.  The debate places emphasis on how health insurance companies are regulated and how insurers could ultimately suffer from President Obama’s health care law.  It is possible that insurance companies start buying competitors and consolidating the market in an effort to save money and make the 80/20 Rule less damaging.  This could start as early as 2013 as the Affordable Care Act’s full implementation happens in 2014.

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