New Health Insurance Rule Could Lead to Denial of Millions of Dollars Rebate to Insurance Premium Payers


The federal government intimated health insurers to devote more of the premium towards medical treatment

The Insurance Companies Dilemma: The state of Michigan has urged the government to delay the requirement as this could lead to denial of millions of dollars in rebate to customers.

Such premium collected is being used by the insurance companies as operational cost for administrative expenses such as salaries of employees, marketing as well as profit of the company. The new federal rule will make the insurance companies spend bare minimum 80 percent of the premium collected towards medical care. Thus the shortage of funds that shall arise might prove to be fatal to the extent of permanent closed down for some small scale insurers.

Why the Howl? The rule came as a part of the 2010 health care overhaul package. Though there is a waiver available it is subject to only those who invest in insurance from their own pockets. As a matter of fact only 4 per cent of the entire Michigan’s population engages in purchasing insurance from their own pocket.

The Federal Government feel that this new regulation for minimum spending will make insurance markets working more transparent. The rule shall be applicable to those who are insured through employers as well and the transparency will make it convenient for the customers to invest in the plans that offers value for money.

What is in the store? Nearly 9 million Americans may be entitled for such rebates by next year. The total combined worth of the rebates estimated by the administration would be nearly $1.4 billion. The average rebate towards the investors who purchase insurance themselves is a total of $164. According to the spending of 2010 the Michigan insurers may owe a total of $ 95 million towards rebate. After the rule being implemented the rebate will be reduced to almost $42 million.

The state Insurance commissions mentioned in his waiver request to the U.S. Department of Health and Human Services that in absence of the adjustment, a significant amount of disruption is anticipated in the market of individual health insurance.

At The Consumer End of Balance: On the other hand Gary Benjamin, the staff attorney as well as health policy expert from Michigan Legal Services, wrote to Sebelius to advocate in favor of consumers. He has requested to stand in favor of the insurance buyers and reject the request of insurance companies. The opinion is that consumers need economic help far more than what the insurance companies do.

The Balancer
The government may take a decision by 17th of November or accepting or rejecting the plea. Earlier, request requests from two different states has already been rejected while a different sort of request from five other states have been accepted as well. At present apart from Michigan nine other states are waiting for the Federal Government’s response.