The federal health law requires insurers to spend 80 cents of every premium dollar on medical care.
Insurers will refund about $330 million in premiums to 6.8 million consumers across the country in the coming weeks as a result of the Affordable Care Act. About $523,000 of that will funnel into Minnesota businesses, according to federal data to be released Thursday.
The payments come as insurance companies comply with a provision of the federal health law that requires them to spend at least 80 cents of every dollar on medical care. If marketing or other administrative costs eat up a larger share of premiums, insurers have to give consumers some of their money back.
All of Minnesota’s rebates come from insurance policies sold by Connecticut General Life Insurance Co., better known as Cigna, for plans sold to businesses with more than 50 employees. Last year, the insurer paid out $451,500 in rebates to Minnesota businesses.
In a statement, Cigna spokesman Phil Mann said the insurer based its 2013 premium rates in Minnesota on our past claims experience as well as expected claims and utilization, which is standard practice in the industry.
“We have a fairly small large-group employer client base in Minnesota, which raises the relative volatility associated with how claims ultimately emerge,” he said, “and, in the end, the actual claims of our Minnesota clients generated a rebate.”
The federal report doesn’t make clear how many Minnesota businesses will receive refunds. Payments cover premiums on about 1,900 workers and are worth an average rebate of $522 per family.
Typically, the money goes to the organization and not to individual workers. Companies must reinvest the rebates in action that improves the health coverage of the workforce, such as wellness activities or “premium holidays.”
Sen. Al Franken, D-Minn., who sponsored the provision, said in an e-mail that he was pleased to see cost-saving measures play out.
“Minnesotans’ health care premium dollars shouldn’t be spent on marketing or huge bonuses for executives — they should go toward paying for actual care,” he said.
Rebate payments have dropped drastically nationwide and in Minnesota since the “80/20 rule” took effect three years ago.
In the first year under the health law, insurers ponied up more than $1 billion in rebates nationwide and about $8.9 million to Minnesota individuals and businesses.
The shrinking payments are a sign that the 80/20 standard is working, advocates say.
“The 80/20 rule is bringing transparency and competition to the insurance market, ensuring that consumers are continuing to receive value for their premium dollars,” Health and Human Services Secretary Sylvia Burwell said in a statement.
The U.S. Department of Health and Human Services estimates that consumers have saved $9 billion on health insurance premiums since the rule took effect.
Jackie Crosby • 612-673-7335