Obamacare Forces Health Insurers to Refund $332 Million6.8 million customers to benefitby Gavin Magor | August 07, 2014 The U.S. Department of Health & Human Services has announced that $332.2 million in premiums will be refunded to consumers following its analysis of the 2013 year-end data insurers are required to file under the Affordable Care Act commonly referred to as Obamacare. Health insurers are, with few exceptions, required to spend between 80-85 percent of the premiums they collect on medical expenses. If an insurer fails to meet the requirements, it must refund the difference to policyholders either directly or through a premium adjustment. The intention is to help keep some control over the previously out of control growth in the cost of health insurance. According to a new analysis by Weiss Ratings, the nation’s leading provider of independent insurance company ratings, only 119 insurers out of 1,771, or 6.7 percent, offering health insurance have been required to provide refunds. In a market that totaled over $450 billion in premium income for insurers during 2013, a total of $332 million is only 0.7 percent and represents a 34.1 percent drop from the 2012 refunds of $504.2 million. This is good news for consumers. It shows that 93.3 percent of insurers met or exceeded the amount of premium income they are required to spend on medical expenses. In fact, according to the Weiss analysis, just ten insurers with seven ultimate parent companies were responsible for nearly half of the total required to be refunded. Interestingly, seven of the ten were also Life and Annuity insurers, perhaps indicating a lesser level of expertise in managing the health expense requirement. Or, maybe a business strategy – since there are no added penalties for investing those customer funds while they have them. Payback Ten – Insurers
1Weiss Investment Ratings as of 8/5/2014.
The average refund per insured family is $80 across the U.S., however, there are some states where the amount is significant. Five states, led by Minnesota, have insurers averaging over $200 in refunds due. Naturally some states have insurers returning more, such as Florida with $41.7 million to be returned, but the average return is one of the lowest at $65 per family because it affects over 980,000 consumers.
Significant Five – States
1Weiss Investment Ratings as of 8/5/2014.
Of course, insurers will prefer not to actually send you a check for your refund. Having held on to your money for at least a year, it is reasonable to assume this cash flow has earned them over $8 million based on average investment returns for Health insurers. Eking out your refund by lowering your premium over a further year will allow them to earn even more — much better for the insurers’ business models. And, based on the average per family refund of around $80, you won’t even notice the difference after rate adjustments. If your insurer is on the list of ten required to payback a portion of your health insurance premium from 2013, watch for correspondence that will let you know what to expect. Regardless of the method your insurer uses, you will get some form of refund. And, your insurer will have an opportunity to use your premium dollars more effectively on your behalf in the coming year. Make sure you have the most recent Weiss Financial Strength and Investment Ratings. Visit WeissWatchdog.com to set up a watch list. Weiss will send you an alert whenever the rating for a company on your list changes.
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