So, here it comes- or not. The PPACA (Obamacare) stipulates that health care insurers are required to justify their health care premiums. And, should they spend less than 80% of those premiums on benefits (this is called the medical loss ratio ) for small companies and individuals or 85% of large company insurance costs on benefits, they are “legally overcharging” these subscribers.
And, surprise of surprises- they are. Now comes the next question. The rebates are required this year- but that date is after the Supreme Court will announce its ruling on the validity of the various components of the act. The current law stipulates the insurance company notify the Federal government by June, with the payments due by August. One can bet that the insurers will do absolutely nothing until the Supreme Court ruling is issued.
How much money are we talking about? About $ 1.3 billion in excess premiums. Given that total health care is $ 2 trillion a year, this does not sound like much. But, those health care costs includes all expenditures, including Medicare, Medicaid, unfunded care, and private payments. Medicare and Medicaid cover about $ 900 billion of the total health care costs. And, 60% of all employees (especially for the larger firms) are covered by “self-insured plans”, where the employers never use insurance (except as a stop gap ‘safety net”) and pay for health care costs directly. Now, that rebate is looking to be a much larger component of what we all thought we were fairly paying. (The numbers are about 6% of the total $ 21 billion in profits that the insurers reported for 2011.)
Of that $ 1.3 billion in excess premiums, about 1/3 ($426 million) is due to those who paid for their own health care. About ½ ($541 million) will go to the larger company plans, with the remainder accruing to smaller companies ( $337 million). These numbers were determined by the Kaiser Family Foundation. (Note that Goldman Sachs [via Matthew Borsch] has done a similar analysis, arriving at a slightly smaller total of $ 1.2 billion.)
Don’t get too excited, though- employees will not see those rebated funds, since they are the property of the employers. (It is possible some pass-through should be afforded employees.) Kaiser estimates that about 1/3 of all individual policies (those paid for by the insured directly) will receive rebates, to the tune of about $127, with 28% of employees at small firms accruing about $ 76 in excess premiums and 19% of the larger firms’ employees involving about $ 72 in excess premiums. However, these are national averages and the overcharges vary state by state.
Some of the big payers will be United Health, which will owe more than $ 300 million (of their $ 28.8 billion in premiums), Aetna, which will owe $ 177 million (on $ 11 billion in total premiums), and Wellpoint with $ 94 million ( $33.2 billion overall). Other firms required to refund premiums will include BlueCross ( $ 250 million) and Coventry Health Care ( $ 50 million).
Now, we just have to wait for the opinion…
Well it’s good to see that someone is keeping an eye on these companies and it will be interesting to see how it all pays out. We are self-insured with huge deductibles just so we could lower the premium. It’s a tough route to take because we never know what the year will bring health-wise. Great post, Roy! Thank you for the info.
Oops – I meant to type *plays out* instead of *pays out*. Possibly wishful thinking?
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I thought you intentionally used that play on words, Suerae!
Nice Post Roy! Healthcare is one of the most complicated and frustrating things to most people. Thanks for keeping us informed and this “legally overcharging” concept blows me away!
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I always love how the “old” (which may return on 30 June) method of counting as a valid cost a nurse that tries to upsell me, Kristoffer…
One can only hope that the Supremes finally take their obligations as seriously as their predecessors (i.e., not as political as the current denizens).
I am looking for an updated copy of the HR3200 bill — that is, if there is one. I keep a copy handy to (ahem) argue the opinions of friends and family — or not 😉 But I do like to be informed and come to my own conclusions. What a world we would live in if everyone just did the right thing where our country is concerned… of course, we’d have to vote on it first 😉
You don’t want the bill, anymore, PeggyLee- you want the Act as signed by Obama- and, more importantly, the regs! For example, it was not clear from PPACA if the employee healthcare costs were capped at 9.5% of W2 income, but the family portion upped that to 50% that there would be NO rebates or subsidies. The Act implied that there would be. The regs say- the only way subsidies exist, for those whose employers offer healthcare, is if the costs for the EMPLOYEE exceed the threshold…
Oh, and this is NOT a democracy. Our votes don’t count. It’s a Republic- one that, in my mind, has been perverted by lobbyists, whose opinions count more than the people- and the votes of our representatives (swayed by the lobbyists) are the only ones that count… (which is why we need to vote for the proper representative and certainly for the best President)…
Roy
I’ll buy a taco with my share and still have to pony up 50 cents.
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It depends if YOU buy the healthcare- or the employer did, Shawn…
BTW- how much DOES a taco cost?
Roy
Some things like this are simply dumbfounding…probably won’t be standing at my mailbox holding my breath.
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Tambre:
If you pay for your own insurance, this will have tremendous implications for you. Because California is one of those places that will see big changes.
Roy
My mind totally boggles when we start talking about trillions of dollars, even billions of dollars. I can’t fathom that kind of money, I guess. I had a section of insurance cost etc explained to me by a surgeon one time. He told me that we have patient A who has medicaid and patient B who has a private insurance. Both are going in for Gallbladder surgery. The surgical room costs the surgeon let’s say 3,000 dollars, with nurses etc etc…He costs 2,000 dollars. Medicaid pays a flat 1,000 dollars for the operating room, and a flat 500 dollars for his time. So the patient who has insurance ends up getting billed not only for their own surgery, but because medicaid doesn’t cover the actual cost of the other surgery, the price goes up for the patient that has the insurance. I know it is a super simplistic way of explaining things. In the end how many surgeries does the patient with insurance end up paying for. Well, since taxes pay the medicaid, the insured patient has paid for that surgery, and their own surgery plus paying whatever extra their insurance doesn’t cover because they again have to pay for the other person’s surgery. I don’t think people really realize that. Which, I know all this is only a small part of your own point. My mind goes back in time before it was the law that you HAD to have car insurance. In a small town there may be one guy selling it, and after the law came into being there are twenty businesses in a small town selling insurance. You’d think that would make the prices better on the consumer over all, but not really because it’s the law you have to have it so the edge goes to the companies. I’ll admit now I’m rambling a bit, but this whole insurance debate drives me crazy. I think health care in a civilized culture is a basic human right, and we should all be able to go to the doctor and get the meds we need without wondering if we get those meds can we eat this month (or worse). Like chemotherapy which runs between 30k to 100k or more a pop. So we have Obamacare, which confuses the deuces out of me. On one hand health insurance for everyone sounds great, but like that memory of before car insurance was made mandatory what is it going to do, really do to the consumer. Roy, I am sorry I have just vomited ramble all over your blog…the bottom line is I love the post, it confuses me this entire issue because I believe in being financially responsible from the top down, but also believe the human life is priceless and health care for anyone who needs it should be within reach of everyone. So there, I’ve said a lot and nothing at the same time. 😉
Believe it or not, that is one of the other requirements of PPACA. To explain the insurance to those buying or obtaining it- with three scenarios. And, we will be able to look at the various policies and their costs- to finally compare apples to apples and oranges to oranges.
I admit that I have been doing these comparisons for our companies and our clients for decades, but I am not the average Joe. Who knows he needs insurance, wants to cover himself and his family, “confuses the deuces” to use your term, and gives up.
One can only hope that this change can occur.
Roy
I used to be insured by Amica, a co-op type of insurance, and at the end of every year I received a rebate. That was for auto and home. Maybe my health insurance company will do the same. Although I’m not going to hold my breath. 🙂
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Lisa, it all depends upon the Supreme Court decision. If it upholds PPACA, then this factor will apply. And, unless YOU paid for your health insurance, the rebates will be provided to employers (who pay for most of the insurance). Even if these firms require contributions from employees, don’t expect them to pass along the reductions.
Once again Roy you are always great about sharing the stats and points on issues at hand. I for one am not holding my breath for any kind of rebate from Blue Cross (my insurance). In fact, they just raised our family insurance premiums by $52 per month! And that is a 2nd increase within 9 months.
I will look forward to you getting back to us about the opinion and ongoing saga of health care and insurance.
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You are a prime example why PPACA needs to survive. The willy nilly rate raising demanded from individual plans, claiming they can”t rate you (and, therefore, hit YOU with the increases they can’t get from others) needs to stop. June…June will tell where we go.
Roy
Good info. Lucky me I ran across your site by chance (stumbleupon). I have book-marked it for later!
Ioana- lucky for me, too! So glad you found the blog!
Roy
Thank you for visiting and commenting. I am so glad that I could help you understand the program and its vital information.