First ‘medical loss ratio’ rebates coming

One provision of the health reform law that went into effect in 2011 is the requirement that health plans spend 80 or 85 percent of premiums on medical care: 85 percent for large group plans and 80 percent for most small group and individual plans. Health plans that spend less on medical care must issue rebates to their customers.

In August, health plans will have to make their first-ever rebate payments, and an analysis issued last week by the Kaiser Family Foundation estimates those rebates will total about $1.3 billion. A Goldman Sachs analyst estimated the amount would be around $1.2 billion. Here is Kaiser’s estimate on how the payments are likely to break down nationally:

  • Rebates in the individual market: They should total about $426 million, with 31 percent of individual market enrollees receiving an average of $127 per person.
  • Rebates in the small group market (rebates will be issued to the employer groups): They should total about $377 million nationally, and will be issued on behalf of 28 percent of enrollees, at an      average amount of $76 per enrollee.
  • Rebates in the large group market (rebates will be issued to the employers): Rebates should total about $541 million nationally, and will be made on behalf of 19 percent of large group enrollees at an average of $72 each.

“This is one of the most tangible benefits of the health reform law that consumers have seen to date,” said Larry Levitt of the Kaiser Family Foundation.


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