This summer, insurance companies are sending money back, thanks to the ACA’s “medical loss ratio” rule. The Department of Health and Human Services (HHS) announced today that insurance companies will be sending out $1.1 billion in rebates to 12.8 million consumers around the country. In New York, over 1 million consumers will receive more than $86.5 million in rebates, or an average of $138 per family. The average rebate for a New York family with small group coverage is $632.

Why the rebates? The ACA requires insurance companies to spend at least 80 percent of every premium dollar (85 percent for plans in the large group market) on medical care and quality. HHS calls it the “80/20 rule.” If a plan spends less than 80 percent of premiums on medical care, it has to give back the extra money. Here in New York, of course, we raised the bar a little. Insurance plans for individuals and small groups have to spend 82 percent of every premium dollar on medical care.

So what can you expect from your insurance company? First, you can expect to get a letter explaining the rule and whether the plan met the 80 (or 82 or 85) percent minimum spending on medical care. If not, the letter should explain how far off they were, and how much is owed in rebates.

If your insurance company owes a rebate you might receive:

• a rebate check in the mail;
• a lump-sum reimbursement to the same account that was used to pay the premium if it was paid by credit card or debit card;
• a direct reduction in your future premiums; or
• a rebate from your employer using one of the above rebate methods, or a rebate “in a manner that benefits its employees.”