THE AFFORDABLE CARE ACT

REBATE OF PREMIUM DUE TO 

MISSING LOSS RATIO TARGET

At some points in the past I have used this space to make some important remarks concerning life in the US, especially when it concerned important information about money.
This another one of those times.

One of the points of the Affordable Care Act ("ObamaCare for some of you) is that an insurance company is restricted to spending 85% of the premiums it collects for health care services such as doctors' bills, hospital stays and activities that contribute to the improving of health care quality.  No more than 15% can be spent on administrative costs like salaries, sales and advertising.  If an insurance company does not meet the requirements of the law, it must then reimburse the portion of the premium that it overspent (or even underspent) to the employer or to the employee.  Insurance companies have begun to do just that.  My son has received his notice from the group health insurance of his employer telling him that the rebate for his group will be 0.5% of all the premiums collected by the health care insurance.

When you analyze this, you can see that there could be a fairly large upside to this concept for the employees as well as the employers.  If employees practice good health discpline and therefore spend less at the doctor and the hospital, there is a chance that the rebate could even go higher since less money will have to be paid out to health care providers from the premiums collected.

This is a new concept for health insurance providers.  It is a good one.  For 20 years I managed the group health benefits for some large companies.  Every year I would battle the insurance companies about the outrageous 15 to 18% increases in premiums.  Many times I was able to get something for 11 or 12% but the battle was fierce and many times not very polite.  And, there never was a rebate.

This is not a totally new concept for Workers' Compensation Insurance.  Workers' Compensation Insurance premiums are paid entirely by the employer.  They are a percentage of the wages and salaries that the employer pays to the employees.  If the employees work safely and do not incur any injuries, the premium of the employer goes down.  This is measured on a three year running average.  This serves as a strong incentive for people to work more safely.  Some employers reward employees for their good behavior in this realm.

It is therefore not outside the parameters of reality that a given group of employees could contribute to the controlliing of the premiums paid to their group health care provider by practicing strong health improvement discipline to keep the premiums down, or the rebates up.  Think about it.  Employers and employees can now do something about putting pressure on the insurance providers to keep prices reasonable because they are constrained to control their costs in relation to the premiums received.

This is an oversimplified description of the process.  It is however correct.  To get more information and to see what possibilities may exist for you, go online and educated yourself here:  http://www.healthcare.gov/law/features/costs/value-for-premium/index.html

Employeers and employees, look at this.  It could be just what you have been seeking.