More than 12 million Americans will receive $1.1 billion in rebates from insurance companies this summer because of the Affordable Care Act's 80/20 rule, known as the Medical Loss Ratio standard. These rebates will be an average of $151 for each family covered by a policy.
The health care law generally requires insurance companies to spend at least 80% of consumers' premium dollars on medical care and quality improvement. Insurers can spend the remaining 20% on administrative costs, such as salaries, sales, and advertising. Beginning this year, insurers must notify customers how much of their premiums actually have been spent on medical care and quality improvement.
Insurance companies that do not meet the 80/20 standard must provide their policyholders a rebate for the difference no later than August 1.
Consumers owed a rebate will either receive a rebate check in the mail, a lump-sum reimbursement to the same account that they used to pay the premium if by credit card or debit card, or a reduction in their future premiums, or their employer will apply the rebate in a manner that benefits its employees.
Consumers in every state will receive a notice from their insurance company informing them of the 80/20 rule, whether their company met the standard, and, if not, how much of the difference between what the insurer did or did not spend on medical care and quality improvement will be returned to them.
A detailed breakdown of the rebates by states and market is available on HealthCare.gov.