Health-Insurance Consumers to Get $743 Million in Rebates Under ACA Rule - The Wall Street Journal
Health insurers are expected to pay out a record $743 million to consumers this month under an Affordable Care Act rule that requires refunds if the companies don’t spend a big enough share of premium dollars on health care.
The sum, which will go to about 2.7 million consumers who bought individual health policies from insurers, will be more than four times the amount paid out last year. The payout also dwarfs the next-highest total, $399 million in 2012, the first year of the refunds, according to a new analysis from the Kaiser Family Foundation, which calculated the total rebate payments by reviewing federal filings.
Consumers who get the rebates are expected to receive about $270 on average, but some policyholders could get as much as around $2,000. The payments, which will often come in the form of checks, must be sent to consumers by the end of September. For a family with a shared policy, the insurer issues one rebate.
Consumers will get the rebates even if most or all of their premium costs were covered by federal subsidies.
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Insurers will pay out an additional $534 million to employers this year under the same ACA rule, and many employers are expected to pass along a portion of that to workers.
Under the ACA, insurers must spend the lion’s share of the revenue they get from premium payments on health-care costs. For people who buy their own health insurance, if that proportion falls below 80%, the insurer must refund the difference to policyholders.
The large rebate total for 2019 largely reflects steep rate increases that took effect in 2018 for ACA plans, said Cynthia Cox, a vice president at the Kaiser Family Foundation. “It’s really driven by individual market insurers in 2018 overpricing their plans,” she said. The hikes bolstered insurer profits but overshot the ACA’s guardrails.
The payments come as the future of the 2010 law remains in doubt, as the Trump administration backs a lawsuit from several Republican state attorneys general trying to strike down the entire health law. At the same time, some Democratic presidential candidates have backed replacing the law with a federal health-care system.
The issue could come up again during Thursday’s Democratic presidential debate. Former Vice President Joe Biden wants to preserve and build on the ACA, widely known as Obamacare, while also adding an option where people could buy into Medicare. Sens. Bernie Sanders of Vermont and Elizabeth Warren of Massachusetts are pushing for Medicare for All, which generally would move every American, even those with employer-based coverage, to a government-run health plan.
Among the insurers with the biggest total expected payouts for individual plans are Centene Corp. , Health Care Service Corp., Cigna Corp. and Virginia-based Optima Health, which is owned by hospital system Sentara Healthcare.
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The outlays aren’t likely to have much effect on earnings because insurers have generally accrued for them in advance, said Matthew Borsch, an analyst with BMO Capital Markets.
“You file your rates assuming you’re going to come in above that 80%,” said Geoff Bartsh, a vice president at nonprofit insurer Medica, which is paying out about $14 million in individual-plan rebates. “We don’t want to be in a position where we’re sending out rebates. No one shoots to be there.”
Mark Nave, a senior vice president at Highmark Inc., an insurer that is part of Pittsburgh-based nonprofit Highmark Health, said health costs in 2018 were lower than the company had projected when it boosted rates by 12% that year in Pennsylvania. Highmark will send out checks worth around $51 million in total to its individual policyholders in that state, in amounts ranging from $341 to $1,657.
“You’ve got limited information on the population you’re insuring” when rates are set, he said.
Optima Health, which sparked local pushback for steep rate increases, will be paying out $99 million, with an average of $1,850 per individual policy. The insurer ended up getting a $94 million payment via another ACA program designed to smooth risk for insurers, which it hadn’t expected when it set its rates, said Dennis Matheis, president of Optima Health.
Ian Dixon, an app developer who founded Virginia consumer group Charlottesville for Reasonable Health Insurance, said the Optima Health rebates won’t make up for the rate hikes local residents experienced. “They really don’t compensate people for the overcharging,” said Mr. Dixon. “It doesn’t even come close.” Mr. Matheis said he was “totally sympathetic with the consumers.”
A spokesman for Health Care Service said the company exceeded the 80% threshold for the “vast majority of our customers in the states where we operate.”
Cigna said it is sending out rebate checks to individual-market policyholders in five states and that they would be delivered by the end of September. Centene declined to comment.
Write to Anna Wilde Mathews at anna.mathews@wsj.com and Stephanie Armour at stephanie.armour@wsj.com
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