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Health care rebate
Old 07-13-2012, 02:58 PM   #1
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Health care rebate

OK... I am putting this here because it is not a FIRE related post...

But, I am going to see if there is anybody else that is not RE that has this issue...

Today our company received a rebate check based on Obamacare saying there was a limit on the amount of 'profit' they can make. So, that is the good news. The bad for me is that they say we might have to distribute this to the employees.

I have started to look at the sites given, but it does not seem to be a straight 'this is what you do' kind of thing....

SO, anybody else have this issue? If so, what did you do?
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Old 07-13-2012, 03:33 PM   #2
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I have been reading articles that said companies that provide health insurance would probably be keeping the rebate but I haven't actually read anything about the actual rules.

Seems like a proportional rebate might be reasonable. If you pay 80% of the cost of the insurance, then you get 80% of the rebate.
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Old 07-13-2012, 04:02 PM   #3
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It's not a limit on profit, it is a requirement to spend a minimum on coverage.

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Seems like a proportional rebate might be reasonable. If you pay 80% of the cost of the insurance, then you get 80% of the rebate.
This seems reasonable. Using it to improve the coverage the employees receive would also seem legit.
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Old 07-13-2012, 04:16 PM   #4
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Here is the best that I can find so far.

The short answer is 'it depends'....

I think the company falls under the one where they distribute to participants.... but they do not say which participants and at what rate? So, someone who choose to only cover spouse would seem to get less than someone who choose family. But, what is they left the firm?


Technical Release No. 2011-04


"Similarly, assuming the plan documents and other extrinsic evidence do not resolve the allocation issue, the portion of a rebate that is attributable to participant contributions would be considered plan assets. Thus, if the employer paid the entire cost of the insurance coverage, then no part of the rebate with respect to this particular policy would be attributable to participant contributions. However, if participants paid the entire cost of the insurance coverage, then the entire amount of the rebate would be attributable to participant contributions and considered to be plan assets. If the participants and the employer each paid a fixed percentage of the cost, a percentage of the rebate equal to the percentage of the cost paid by participants would be attributable to participant contributions. If the employer was required to pay a fixed amount and participants were responsible for paying any additional costs, then the portion of the rebate under such a policy that does not exceed the participants' total amount of prior contributions during the relevant period would be attributable to participant contributions. Finally, if participants paid a fixed amount and the employer was responsible for paying any additional costs, then the portion of the rebate under such a policy that did not exceed the employer's total amount of prior contributions during the relevant period would not be attributable to participant contributions."
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Old 07-13-2012, 04:21 PM   #5
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It's not a limit on profit, it is a requirement to spend a minimum on coverage. ....
While I agree that a requirement to spend a certain amount on benefit is a better answer, it also functions as a limit on profit since profit can only be 1 minus the percentage that must be spent on benefits - expenses.

I don't believe there is any requirement as to what you do with the rebate. You may want to use it to reduce or eliminate future increases in the employee's contribution or perhaps even reduce their future contributions.

A true refund could be a bit dicey for employees who have left the company or whatever, so I would use it prospectively rather than retrospectively.
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Old 07-13-2012, 04:47 PM   #6
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While I agree that a requirement to spend a certain amount on benefit is a better answer, it also functions as a limit on profit since profit can only be 1 minus the percentage that must be spent on benefits - expenses.
There is no limit on profit. There may be a limit on profit margin because there is a requirement to spend a minimum % on healthcare cost. Not sure if this is semantics or not so I won't pursue it.

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I don't believe there is any requirement as to what you do with the rebate. You may want to use it to reduce or eliminate future increases in the employee's contribution or perhaps even reduce their future contributions.

A true refund could be a bit dicey for employees who have left the company or whatever, so I would use it prospectively rather than retrospectively.
A best effort to allocate the rebate based on how the premiums were paid should be good enough. The direct rebate is pretty easy to calculate, and if the company can send out 1099's it can also send checks. That would be my preference because it's clean and simple.
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Old 07-13-2012, 05:04 PM   #7
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Quote:
Originally Posted by MichaelB

There is no limit on profit. There may be a limit on profit margin because there is a requirement to spend a minimum % on healthcare cost. Not sure if this is semantics or not so I won't pursue it.

A best effort to allocate the rebate based on how the premiums were paid should be good enough. The direct rebate is pretty easy to calculate, and if the company can send out 1099's it can also send checks. That would be my preference because it's clean and simple.
Just opened up my mail a few minutes ago and got a $28 refund check from Anthem BCBS. My policy is an individual one and my yearly premium is under $900. They said they only spent 76% of premiums on healthcare forcing the rebate. The letter mentioned they had to either cut the checks or apply it to premium. They chose to send checks. They were nice enough to warn me that the rebate check does not mean lower premiums in the future.
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Old 07-13-2012, 05:35 PM   #8
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Originally Posted by Buckeye View Post
....

Seems like a proportional rebate might be reasonable. If you pay 80% of the cost of the insurance, then you get 80% of the rebate.
This would make sense to me. I hope the rebate notice come with an explanation of the period covered.

The challenge for some employers is to distribute the rebate where the employer paid one % for employee insurance but the employee paid for dependents on the same contract.
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Old 07-13-2012, 06:05 PM   #9
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Proportional rebate would be fair. So would something like using it to offset next year's HI costs.
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Old 07-13-2012, 06:34 PM   #10
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Based on a recent presentation by a SVP for Premera (WA St Blue Cross), you can count on premiums 40-50 +/-% higher by 2014.
See story at Staggering Health Insurance Premiums Right Around the Corner, Predicts Premera Vice President | Washington State Wire - Washington State Wire is an independent nonpartisan news gathering organization focusing on Washington state government and the po
Based on his firm's insurance portfolio he said, "I think it is staggering that in fact the Affordable Care Act increases the per-person cost of health care from $9,000 to $14,000,” he said. “I find that just staggering. To focus in on two costs, though, I think really drives home that point.
While I take the absolute numbers with a grain of salt, his logic is pretty clear that very, very few of us will be seeing lower cost health insurance any time soon.
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Old 07-13-2012, 10:02 PM   #11
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Originally Posted by nwsteve
Based on a recent presentation by a SVP for Premera (WA St Blue Cross), you can count on premiums 40-50 +/-% higher by 2014.
See story at Staggering Health Insurance Premiums Right Around the Corner, Predicts Premera Vice President | Washington State Wire - Washington State Wire is an independent nonpartisan news gathering organization focusing on Washington state government and the po
Based on his firm's insurance portfolio he said, "I think it is staggering that in fact the Affordable Care Act increases the per-person cost of health care from $9,000 to $14,000,” he said. “I find that just staggering. To focus in on two costs, though, I think really drives home that point.
While I take the absolute numbers with a grain of salt, his logic is pretty clear that very, very few of us will be seeing lower cost health insurance any time soon.
Nwsteve
Unfortunately that article made a lot of sense. If I lose my grandfathered plan, the article was written to someone like me. One who cannot benefit from the subsidies and carries a cheap high deductible plan. I obviously am not going to panic, but if it came to fruition, I did find out there is no penalty for not having health insurance. IRS cannot make you pay the penalty in anyway except by withholding refunds. I can always change my withholding and owe money instead.
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Old 07-13-2012, 10:25 PM   #12
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Originally Posted by nwsteve View Post
Based on his firm's insurance portfolio he said, "I think it is staggering that in fact the Affordable Care Act increases the per-person cost of health care from $9,000 to $14,000, he said. I find that just staggering. To focus in on two costs, though, I think really drives home that point.
While I take the absolute numbers with a grain of salt, his logic is pretty clear that very, very few of us will be seeing lower cost health insurance any time soon.
Nwsteve
I see no logic in his assumptions. I do see fear of change. We are already paying more than twice as much per person for poor quality, disorganized healthcare.

The overhaul of our healthcare system is way, way overdue. ACA is a start.
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Old 07-13-2012, 10:30 PM   #13
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Originally Posted by Mulligan View Post
Just opened up my mail a few minutes ago and got a $28 refund check from Anthem BCBS. My policy is an individual one and my yearly premium is under $900. They said they only spent 76% of premiums on healthcare forcing the rebate. The letter mentioned they had to either cut the checks or apply it to premium. They chose to send checks. They were nice enough to warn me that the rebate check does not mean lower premiums in the future.
I also received a rebate check this week for the same policy, same 3.2% rebate of premiums. Nice unexpected check!
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Old 07-13-2012, 10:34 PM   #14
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There is no limit on profit. There may be a limit on profit margin because there is a requirement to spend a minimum % on healthcare cost. Not sure if this is semantics or not so I won't pursue it. ......
If 85 cents of every premium dollar must be paid out in benefits, then the effect is that the maximum profit is 15 cents. IMO this is undeniably a limit on profit since profit can never exceed 15% of premiums. In reality the profit will be 15 cents less administrative costs, overhead, taxes, etc.
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Old 07-13-2012, 11:15 PM   #15
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"Back in the day" Blue Cross was a not for profit and their managers & executives were paid accordingly. Cry for them, NOT!!!
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Old 07-14-2012, 12:20 AM   #16
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Originally Posted by pb4uski View Post
If 85 cents of every premium dollar must be paid out in benefits, then the effect is that the maximum profit is 15 cents. IMO this is undeniably a limit on profit since profit can never exceed 15% of premiums. In reality the profit will be 15 cents less administrative costs, overhead, taxes, etc.
It is 80% for small plans...
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Old 07-14-2012, 01:23 AM   #17
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"Back in the day" Blue Cross was a not for profit and their managers & executives were paid accordingly. Cry for them, NOT!!!
Just because an org is non-profit, doesn't mean it's immune from corruption, or will always pursue policyholder's or the public's best interest..

Exhibit A: Roy Heimburger, former CEO of Missouri Blue Cross/Blue Shield, who was involved in a very shady real estate deal with BCBS's headquarters and giving very generous % in the deal to a real estate developer. Fired from his position, then indicted by the Feds, and later plead "no contest".
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Old 07-14-2012, 03:59 AM   #18
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Originally Posted by Mulligan View Post
Just opened up my mail a few minutes ago and got a $28 refund check from Anthem BCBS. My policy is an individual one and my yearly premium is under $900. They said they only spent 76% of premiums on healthcare forcing the rebate. The letter mentioned they had to either cut the checks or apply it to premium. They chose to send checks. They were nice enough to warn me that the rebate check does not mean lower premiums in the future.
I got a check a few days ago for about 10% of my premiums paid for 2011 (covering 8 months because I switched to them midyear; I have not heard from the other company I had in 2011). In their cover letter, they said they had to use 80% of premiums to pay losses and they came up short.

I will not be itemizing my deductions for 2012 so I would not be applying this to any med expense deductions the way I would a property tax rebate, for example.
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Old 07-14-2012, 09:21 AM   #19
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This is a recent update from the Kaiser Family Foundation on rebates KAISER ANALYSIS: ESTIMATED HEALTH INSURANCE REBATES UNDER THE HEALTH REFORM LAW TOTAL $1.3 BILLION DOLLARS IN 2012 - Kaiser Family Foundation

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Consumers and businesses are expected to receive an estimated $1.3 billion by this August in rebates from health insurers who spent more on administrative expenses and profits than allowed by the Affordable Care Act (ACA), finds a new analysis from the Kaiser Family Foundation of the latest estimates provided by insurers to state insurance commissioners.

The rebates include $541 million in the large employer market, $377 million in the small business market, and $426 million for those buying insurance on their own. Rebates in the group market will generally be provided to employers, and in some cases be passed on to employees as well.
Here is a KFF fact sheet discussing the MLR and rebates. http://www.kff.org/healthreform/upload/8282.pdf
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Old 07-14-2012, 10:06 AM   #20
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Proportional rebate would be fair. So would something like using it to offset next year's HI costs.
This seems about right to me. If an employer covered 100% of the cost of the health plan, I'd think they could keep all of the rebate. But that's a rare situation these days, and if the employees were responsible for (say) 30% of the premium costs, they should collectively get 30% of the rebate money. Seems like the fairest way to do it.
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