A new study by the Kaiser Family Foundation estimates the rebates at $1.3 billion, which should arrive by August, from health plans that spent too much on administrative overhead. The money paid will be tax free to the recipients, according to rules on so-called medical-loss ratios that are part of the Affordable Care Act signed into law two years ago by President Obama.
Under the law, individual policies and those sold to small groups with 49 or fewer workers generally have to spend 80 percent of health plan subscriber premiums on health costs. Policies sold to businesses or groups with more than 50 workers typically have to spend at least 85 percent of premiums on medical care.
“This study shows that asking insurance companies to put more of their premium dollar towards patient care rather than administration and profits is not only popular but also effective,” said Kaiser Family Foundation president and chief executive Drew Altman.
A little more than one-third of the rebate money, or $541 million, will go to large employers, Kaiser said. Meanwhile, small businesses will get $377 million while individual policy holders will get $426 million. Kaiser said that about one in three U.S. consumers in the individual market will get a rebate of $127 each on average.
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