July 27th, 2012
09:27 AM ET
Your check really might be in the mail.
By August 1, health insurance companies have to refund $1.1 billion in premiums to about 12.8 million customers, thanks to the Affordable Care Act.
The "80/20 rule" in the ACA mandates that health insurers spend at least 80% of their customers' premiums on health services, leaving no more than 20% for administrative costs and advertising. That means if an insurance company spends 78% of the money it collects on health benefits for customers, it has to send rebate checks for the additional 2%.
"The 80/20 rule in the Affordable Care Act is intended to ensure that consumers get value for their health care dollars," a letter accompanying the refund checks says.
"It was a surprise," says Connie Kadansky, who is self employed. "My insurance agent tells me that my insurance is going to skyrocket. He hates Obamacare. I read the letter and I said to myself, 'So what's wrong with this? This is good.'"
There's no way to know ahead of time if you qualify for a rebate, and although checks average $151 per household, there's a lot of variability. Check size depends on how your insurance company collected and spent premiums over the past year, specifically in your state.
In St. Louis, Rabbi Randy Fleisher received a $2,808 rebate check earlier this month for his synagogue, which pays 100% of the health insurance premiums for its ten full-time employees.
His Central Reform Congregation advocated for the Affordable Care Act and helped start "Missouri Healthcare for All."
"There's no doubt that it's a positive family value for people to have assurance that medical care will be coming to them in a way that's affordable and available, " says Rabbi Fleisher. "When you're sick, when there are health care challenges, that's about as vulnerable as you can get."
Not all rebates will come as checks in the mail. Companies have the option to refund credit cards used to pay premiums, or discount future premiums.
Insurers also decide under the health care law whether to charge customers more money upfront, knowing that they might have to refund that money later.
"The presence of a rebate should not be viewed as a sign that an insurer is deliberately over-charging its customers," says Adam Powell, a healthcare economist who consults for insurance companies.
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