About 164,000 people in Massachusetts will receive a rebate on their health insurance premiums, averaging about $140 per family, because the insurers spent too much on administrative costs, profits, or surpluses.
Consumers in the state will receive about $12 million in rebates required under a provision of the Affordable Care Act that mandates insurers must use 80 percent of money collected as insurance premiums to pay for health care services, the Obama administration announced Thursday.
Insurers that sell coverage to individuals and small businesses in Massachusetts are held to a higher standard. They must spend 88 percent on medical costs. Those insurers will return $46 million to customers in Massachusetts this year for falling below the state minimum.
It’s not clear how much of the federal rebate total is included in this figure, but Tufts Health Plan spokeswoman Sonya Hagopian said Thursday that the insurer would pay $5.7 million in federal rebates in addition to the about $25 million it’s returning under the state law.
Rebates under the federal law totalled $1.1 billion nationally, according to the Centers for Medicare & Medicaid Services.
The rebates are expected to be distributed by Aug. 1. Those with employer-sponsored coverage will share the rebate total with their employers. Insurers are required to disclose why they went over the limit of 20 percent for non-medical spending.
“This will be valuable information for families and small business owners shopping for insurance,” Health and Human Services Secretary Kathleen Sebelius said in a press call Thursday.
“None of us are used to insurance companies sending money back, but that’s what’s happening thanks to the new law,” she said.
See the accounting of rebates by state and insurance market on the CMS website.