California health insurance rebate checks to be mailed out next week

Health Insurance Refund

Health Insurance Refund

Many policyholders in the state will be receiving money back due to the Affordable Care Act.

President Obama’s overhaul of the medical care system will be providing many California health insurance policyholders with rebate checks, starting next week, as their insurers pay them back for failing to spend their earnings according to the new law’s requirements.

Approximately 1.8 million people in the state will be receiving money back.

These rebates will be either in the form of a reduction in their monthly premiums, or in the form of a check which will be mailed out to them. California health insurance customers aren’t the only ones benefitting in this way. Across the country, there are about $1.1 billion in refunds being issued for this same reason.

The average family rebate is $151. They must be issued by August 1, 2012, and 12.7 million people will be receiving them.

These California health insurance rebates are a result of the “80/20 rule”.

According to state Department of Managed Health Care spokesperson, Marta Green, “It could be a welcome surprise to folks.” She added that “Anything that can make health care more affordable is positive for consumers.”

The regulation that has forced insurers to issue these California health insurance refunds is a part of the healthcare overhaul, which states that 80 percent of the dollars collected through premiums must be spent on actual medical costs. Only up to 20 percent of that money can go toward nonmedical expenses such as administration and marketing. In the large group coverage market, covering employers with over 50 workers, that ratio changes to 85/15.

Insurers that failed to meet this ratio – also referred to as the medical loss ratio – last year, must provide their policyholders with rebates, to make up for the difference. They are allowed to offer this reimbursement in the form of a discount off of the premiums they will pay in the future, a refund check, or a debit or credit card account lump sum payment.

Employers who provide their workers with California health insurance in part or in full can choose to share the refunds proportionally among the workers, or to put the money toward improved coverage.

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