Study: Texas to Outpace Other States in Health Insurance Rebates

Texas consumers and businesses are poised to receive an estimated $186 million in rebates from health insurers under a requirement of the Affordable Care Act, according a study released today by the Kaiser Family Foundation.

The health care act’s medical loss ratio provision requires insurers to issue rebates if their total administrative expenses and profits are relatively higher than those permitted under the act. The Kaiser study estimates that 92 percent of Texas consumers in the individual insurance market will receive rebates, the highest figure for any state in the country.

The provision, which went into effect in January 2011, requires that insurance companies covering individuals and small businesses spend at least 80 percent to 85 percent of insurance premium dollars on health care and improving care quality. The provision is designed to curb spending on administration costs and profit. When insurers don’t meet the 80/20 ratio, they are required to distribute rebates, as they will be doing come August. The Kaiser Family Foundation estimates those rebates based on 2011 data will total $1.3 billion nationally.

In July 2011, the Texas Department of Insurance requested that the state be able to phase in the new provision’s requirements over the course of three years, instead of implementing them immediately, but that request was denied.

The study evaluated insurers and estimated rebate totals in the individual, small group and large group insurance markets. The estimated figures of rebate amounts and percentage of citizens who will receive rebates were high for Texas in all three categories.

In the individual market, 11 Texas insurance plans are projected to pay $127,233,657 in rebates, with the average rebate per enrollee in rebate-paying plans totaling $193.53. Small group and large group market plans are estimated to pay substantially less, the total amount of rebates is about $30 million in each category.

Cynthia Cox, the lead author on the study, says that this year’s rebates, the first to be issued under the new provision, are “pretty substantial,” and that the portion of people affected is surprisingly large, “close to a third of people in the individual market will receive rebates." 

“Utilization this year was relatively low because the economy has been slow to pick up, so people still may be using less health care,” Cox said. “Normally that would mean windfall gains, but now that insurers can’t take in more that 20 percent, the rebates are going back to consumers,” she said.