Insurers could pay $14.6 million in rebates to state consumers

Insurance companies could be required to issue nearly $14.6 million in rebates for health plans covering more than 212,000 Connecticut enrollees later this year as part of the federal health reform law, according to an analysis released Thursday by the Kaiser Family Foundation.

The law requires that insurers spend at least 80 percent of the money they collect in premiums from individual and small group plans on medical care or quality improvement activities; if they don’t, they must issue rebates. The same applies to the large group market, but in those plans, insurers must spend 85 percent of premium dollars on health care or quality activities. In effect, the provision limits how much insurers can spend on administrative costs and profits.

Kaiser Family Foundation researchers based their analysis on preliminary estimates from insurance companies reported to state insurance departments. The rebates are expected to be issued by August.

In Connecticut, the analysis found, three plans each in the individual, small group and large group markets would be required to issue rebates, covering 212,106 members. In the small and large group markets, the rebates would likely go to employers, which might or might not pass them on to employees.

The three individual market plans in Connecticut expected to pay rebates cover 42 percent of the state’s individual market, or 46,465 members. They’re projected to issue $6.36 million in rebates, an average of $136.89 per person. Nationally, 31 percent of individual market enrollees are expected to receive rebates, averaging $127 per person.

In the state’s small group market, insurers are expected to issue $1.85 million in rebates for plans covering 35,589 members, which represents 13 percent of the small group market. The average rebate per enrollee would be $51.97. Nationally, plans expected to issue rebates cover 28 percent of the small group market, according to the analysis, with an average rebate of $21 per enrollee.

In the large group market, the analysis suggests that three plans that cover 130,052 members will offer $6.39 million in rebates — an average of $49.12 per enrollee. Membership in those three plans represents 28 percent of enrollees in the large group market. Nationally, 19 percent of large group enrollees are in plans expected to issue rebates; they would get an average of $14 per enrollee.

The authors of the analysis, Cynthia Cox, Larry Levitt and Gary Claxton, noted that the dollar values of the rebates don’t necessarily reflect the impact of the health law’s requirement.

“The presence of these thresholds and the corresponding rebate requirement have provided an incentive for insurers to seek lower premium increases than they would have otherwise, and in some cases premiums have even decreased,” they wrote. “This ‘sentinel’ effect on premiums has likely produced more savings for consumers and employers than the rebates themselves.”