Obamacare Forces Health Insurers to Refund $332 Million

6.8 million customers to benefit

by 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



Company Name
Total Refunds
($)


Parent Company


Ticker
Weiss Investment Rating1
UnitedHealthcare Insurance Company 40,076,559 UnitedHealth Group Inc. UNH A- (Strong Buy)
Golden Rule Insurance Company 27,543,982 UnitedHealth Group Inc. UNH A- (Strong Buy)
Time Insurance Company 25,840,041 Assurant Inc. AIZ A+ (Strong Buy)
Aetna Health Inc. (a Pennsylvania corporation) 15,984,321 Aetna Inc. AET A- (Strong Buy)
Humana Insurance Company, Inc. 15,517,570 Humana Inc. HUM B+ (Buy)
Blue Cross and Blue Shield of Florida, Inc. 10,138,895 GuideWell Mutual Holding Corp. Private  
Health Options, Inc. 9,119,437 GuideWell Mutual Holding Corp. Private  
Nippon Life Insurance Company of America 7,648,487 Nippon Life Insurance Co. Private  
The MEGA Life and Health Insurance Company 7,087,167 Blackstone Group L.P. BX B+ (Buy)
Aetna Life Insurance Company 6,802,420 Aetna Inc. AET A- (Strong Buy)

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



State


Company Name
Total Refunds
($)
Average Refund
($)


Parent Company


Ticker
Weiss Investment Rating1
Minnesota   523,254 522      
  Connecticut General Life Insurance Co. 523,254   Cigna Corp. CI B (Buy)
Alaska   3,062,042 388      
  Premera Blue Cross 2,626,786   Premera Private  
  The MEGA life and Health Insurance Co. 39,115   Blackstone Group L.P. BX B+ (Buy)
  Time Insurance Co. 396,140   Assurant Inc. AIZ A+ (Strong Buy)
Montana   2,719,595 286      
  John Alden Life Insurance Co. 276,731   Assurant Inc. AIZ A+ (Strong Buy)
  Madison National Life Insurance Co., Inc. 517,921   Independence Holding Co. IHC B+ (Buy)
  The MEGA Life and Health Insurance Co. 217,205   Blackstone Group L.P. BX B+ (Buy)
  Time Insurance Co. 1,700,899   Assurant Inc. AIZ A+ (Strong Buy)
  Trustmark Life Insurance Co. 6,840   Trustmark Mutual Holding Co. Private  
Wyoming   1,483,884 268      
  Altius Health Plans, Inc. 210,297   NA Private  
  Golden Rule Insurance Co. 337,604   UnitedHealth Group Inc. UNH A- (Strong Buy)
  Time Insurance Co. 351,138   Assurant Inc. AIZ A+ (Strong Buy)
  Trustmark Life Insurance Co. 351,450   Trustmark Mutual Holding Co. Private  
  UnitedHealthcare Insurance Co. 233,396   UnitedHealth Group Inc. UNH A- (Strong Buy)
Iowa   1,753,306 206      
  Coventry Health Care of Iowa, Inc. 1,101,411   Aetna Inc. AET A- (Strong Buy)
  Wellmark Health Plan Iowa, Inc. 651,895   Wellmark Inc. Private  

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.

Weiss Ratings, LLC
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Jupiter, FL 33478-6400
1-877-934-7778