This month, about 163,000 families in Illinois are expected to receive a rebate check in the mail. No, it’s not a refund on your federal taxes and it’s probably not the hundred dollars your cousin Sam owes you—it’s actually money back from their health insurance company. Due to a provision of the Affordable Care Act (ACA) called the 80/20 Rule or the Medical Loss Ratio Rule, insurers are mandated to spend at least 80% (85% for the large group market) of the premium dollars they receive from clients on actual health care expenses, and not items like CEO bonuses, marketing, and other overhead. When insurers don’t meet that threshold, they have to issue refund checks to their clients. These clients will be getting a health insurance rebate check with money that their insurance company owes them for not spending at least 80% of their premium dollars on medical care.
In Illinois alone, health insurance carriers have to pay back about $62 million to their clients—the fifth highest amount in the nation—for not meeting the medical loss ratio in 2011. UnitedHealthCare, the second largest health insurance company in the state of Illinois, paid back $13.1 million to policyholders. Nationwide, there are estimates that at least $1.1 billion in rebates will be paid back to the consumers. The average rebate amount to a family that purchases their own insurance is $151—that’s a nice chunk of their own money they will be getting back! Insurers who failed to meet the requirements had to sent out their rebates by August 1, so the checks should have already arrived in many mailboxes.
So, just who is receiving a check? To be clear, not everyone will actually receive a physical check—their refund could be issued to their employer if that employer pays for their health care, or it could be used to credit their account in the future or returned to their credit cards. Even if consumers do not actually receive the check in the mail, this is still money that goes back into the consumer’s pocket, thanks to the Affordable Care Act.
This blog post was coauthored by Viviane Clement.