Health insurers are on the hook for an estimated $1.3 billion in rebates by August of this year, if they were not in compliance with the Medical Loss Ratio (MLR) provision of the Affordable Care Act (ACA) for 2011, according to analysis by the Henry J. Kaiser Family Foundation.

The report, “Insurer Rebates under the Medical Loss Ratio: 2012 Estimates” finds that nationwide, 215 insurance plans covering approximately 3.4 million people report that they expect to issue a rebate to individual market consumers.

The $1.3 billion includes $426 million in the individual market, $377 million in the small group market, and $541 million in the large group market.

Under the MLR rule, those companies that offer health coverage to individuals and small businesses must spend more than 80 percent of premium income on health care claims and quality improvement activities, and reserve 20 percent or less for administrative expenses, such as administering coverage, marketing and profits.

Large group plans have a higher MLR threshold and must spend at least 85 percent of premium income on claims and quality improvement. Administrative expenses must consume 15 percent or less of premium income. Insurers that fail to meet these requirements, must rebate consumers, the amount of the rebate depends on the extent to which the insurer fell below the threshold.


Individual Market

In the individual market, 31 percent of enrollees could receive rebates. Based on insurer estimates, consumers in Texas (92 percent), Oklahoma (86 percent), South Carolina (84 percent), and Arizona (83 percent) are most likely to be eligible. The average rebate is estimated at $127 per person on an annualized basis.

The average rebate will vary substantially by state and within states by insurer. Averaged by state, the largest per-person rebates would be paid to enrollees in Alaska ($305), Maryland ($294), Pennsylvania ($243), Idaho ($241), and Mississippi ($236). No individual market insurers in Hawaii, Maine and the District of Columbia expect to issue rebates.


Small-Group Market

About 28 percent of small-group enrollees could receive rebates. Most likely to receive rebates are small businesses and their employees in the District of Columbia (92 percent), South Carolina (85 percent), New Jersey (79 percent), Florida (73 percent), and Missouri (72 percent).

Small-group plans covering 4.9 million enrollees expect to issue a total of $377 million in rebates this year. Nationwide, 146 insurance plans expect to rebate to small groups. The average amount is projected to be $76 per enrollee on an annualized basis. Alaska ($517), Alabama ($203), Oregon ($172), Louisiana ($170), and Massachusetts ($167) are estimated to have the highest average rebates per enrollee.


Large-Group Market

Large-group insurers expect to issue rebates to 19 percent of large group enrollees. Large businesses and their employees in the District of Columbia (78 percent), New Jersey (67 percent), Colorado (62 percent) and Kentucky (57 percent) are most likely to receive rebates this year.

Insurers offering coverage to large businesses in 14 states do not expect to issue rebates, but total reported rebates in the large group market are $541 million nationwide.

Overall, 125 insurers expect to issue rebates to large groups covering 7.5 million enrollees; a quarter of them are from insurers in New York, with $127 million in

expected refunds. Of those large businesses and their employees receiving rebates, the largest average per-enrollee rebates will are in Vermont ($386), Nebraska ($248), Minnesota ($146), New York ($142) and North Carolina ($121).

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