Small Businesses to See Share of $1.1 Billion in Health Insurance Rebates this Summer

On June 21, the Department of Health and Human Services released figures showing health insurance customers are due rebates totaling $1.1 billion from insurance companies that spent too little of their premium dollars on health care in 2011. These rebates are thanks to the 80/20 “value for premiums” rule in the Affordable Care Act, which requires insurers to spend at least 80 cents of every premium dollar collected in the small group and individual markets on health care (as opposed to lobbying, advertising, executive compensation, and general administration).


HHS also released state by state numbers (available here) for the total amount of rebates and the number of insurance customers who will benefit. These figures include: $123.6 million for 1.3 million consumers in Florida; $86.5 million for 1 million consumers in New York; $61.8 million for 300,000 consumers in Illinois; $43.1 million for 687,000 consumers in Virginia; and $27.9 million for 141,000 consumers in Maryland.


While rebates are not due until August 1, small businesses are already benefiting from the 80/20 rule in another way: it’s been forcing insurers to hold premiums down in attempts to avoid owing rebates to customers. The Main Street Alliance released the following quotes from businesses that are already benefiting from the 80/20 rule in this way:


Louisa McQueeney, CFO of Palm Beach Groves in Lantana, Florida:


“Last November, our health insurance agent called with our renewal: after annual increases of 12 percent, 22 percent, and even 32 percent, our premiums in 2012 were going to increase by a grand total of 0.2 percent. That is, essentially flat. This flat renewal came with exactly the same plan – no dumbing down the coverage, no increase in our deductibles, everything was the same.


“I’m thanking ObamaCare’s 80/20 rule for holding my premiums in check. And now, with the new announcement of more than $123 million in rebates due to 1.3 million people in Florida, we may even get a rebate on top of that. For the first time in my twelve years running this business, the health care picture is finally looking up.”


Brian England, owner of British American Auto Care in Columbia, Maryland:


“We renew our insurance in August every year, so around June is when I usually start to get nervous. When we sat down with our agent last summer, I was bracing myself for the bad news. But when he gave us our quotes, my worry turned to disbelief. Our rates were going DOWN 6 percent! I almost fell off my chair.


“The first thing I asked was, ‘why?’ I just couldn’t make sense of it. Our agent explained the rate cut was thanks to the medical loss ratio requirement in the Affordable Care Act. The health care law is working for my business. It passes this technician’s inspection test with flying colors.”