More than 3 million health insurance policyholders and thousands of employers will share $1.3 billion in rebates this year, thanks to President Obama's health care law, a nonpartisan research group said Thursday.
The rebates should average $127 for the people who get them, and Democrats are hoping they'll send an election-year message that Obama's much-criticized health care overhaul is starting to pay dividends for consumers.
Critics of the law call that wishful thinking.
The law requires insurance companies to spend at least 80 percent of the premiums they collect on medical care and quality improvement or return the difference to consumers and employers. Though many large employer plans already meet that standard, it's the first time the government has imposed such a requirement on the entire health insurance industry.
"This is one of the most tangible benefits of the health reform law that consumers will have seen to date," said Larry Levitt, an expert on private insurance with the Kaiser Family Foundation, which analyzed industry filings with state health insurance commissioners to produce its report. Kaiser is a nonpartisan information clearinghouse on the nation's health care system.
Still, health insurance is expensive, and $127 may not even pay a month's premium for single coverage.
And the insurance industry says consumers should take little comfort from the rebates because premiums are likely to go up overall as a result of new benefits and other requirements of the law.
"The net of all the requirements will be an increase in costs for consumers," said Robert Zirkelbach, spokesman for America's Health Insurance Plans, the main industry trade group.
But the Kaiser report said the rebate requirement may be acting as a brake on the industry, discouraging insurers from seeking big premium increases to avoid having to issue refunds later and face possible criticism.
The new law has "provided an incentive for insurers to seek lower premium increases than they would have otherwise," the report said. "This 'sentinel' effect on premiums has likely produced more savings for consumers and employers than the rebates themselves."
More than 3 million individual policyholders will reap rebates of $426 million, averaging $127 apiece. These are consumers who are not covered through an employer and buy their policy directly.
In the small-employer market, plans covering nearly 5 million people will receive rebates totaling $377 million.
Employers don't have to pass rebates on to workers, and they can take them as a discount on next year's premiums.
Insurers serving large employers face a stiffer requirement. Under the law, they must spend 85 percent of premiums on medical costs. The study found that 125 plans covering 7.5 million people at large employers will give back a total of $541 million.
Most plans operated by major national employers are exempt from the requirement.