Affordable Care Act Rebate

In March 2010, President Obama signed the Affordable Care Act into law.  This law, also known as Obamacare, was modeled on the healthcare law in Massachusetts championed by then Governor Mitt Romney. The law survived a Supreme Court decision this past July.  As you may know from previous posts on this website, I’m a big supporter of this law.  While I personally think a lot of objection to this law is unfounded, this post is not about that argument.  But rather to simply share a letter I got from my former health insurance provider.

Before my retirement, I had health insurance through my employer (which I’ve carried into retirement).  The carrier was PacifiCare Life & Health Insurance Company, which is a subsidiary of the giant United Healthcare.  This past week I got a letter from those guys which said that they will be rebating a portion of my health insurance premiums which were paid last year through my employer or group policy holder.  They go on to explain that they are required to do this because of the Affordable Care Act.  It turns out that if an insurance company doesn’t spend at least 85% of the premiums on healthcare services such as doctors and hospital bills and activities to improve health care quality than they must rebate the difference back to the to the employer and ultimately the employee.  It turns out that PacifiCare Life & Health Insurance Company only spent 81% of the total premiums that they had collected on health care and activities to improve health care quality. Since they miss the 85% target, they must rebate 4 percent of the premiums it received.  According to the letter I got,  the monies must be rebated by the 1st of August or applied to the first Health Insurance premium that is due after 1 August.

I don’t know when (or if) I’ll get the check for the rebate of premiums, but I can tell you this. Without this law in place, insurance companies would not be held accountable for their accounting practices.  That makes this law a winner as far as I’m concerned.