Health Insurance Rebates are Coming. A brief explanation

The other day I got a check in the mail from my health insurance company.
You may have gotten one too. Or you might get one next week. What’s the deal?
One provision of the PPACA (“Affordable Care Act” or “health reform” or “Obamacare”) that did not get a lot of press was the “Medical Loss Ratio” (MLR) rules. And with a name like that, why wouldn’t it get press? (Kidding)
Those rules stipulate that, for health insurance policies for individuals and small businesses, the health insurance company must pay 80% of its revenues out in the form of claims. In other words, for every dollar they receive in premiums, 80 cents must be paid back out in the form of claims.
That leaves health insurance companies with a 20% margin for everything else — overhead, salaries, commissions (guess who got cut!), marketing, shareholder profits, compliance, etc.
The law went on to say that if that 80% threshold wasn’t met, the insurance companies must send rebate checks out to policyholders. Voila! I got a check and you probably will too.

Now, this provision covers a company’s “block” of business in your state, not each individual policy. So you’re not going to get 80% of your premium back if you didn’t have any claims. But if that company’s overall block of business, of which you’re one small part, didn’t hit those numbers, then you’ll get a bit of money back.
Personally, I find the timing of all of this interesting. I mean, don’t you think it’s interesting that, as election season begins to ramp up, millions of Americans are suddenly getting rebate checks from their health insurance companies that are directly tied to the controversial law? This is not an accident!
Anyway… that’s the story behind rebate checks. Most insurers got pretty close to 80%, but not quite there, so the checks are coming but they aren’t super-high. But now you know why.