States and Rebates

If you run a small business in Florida, are self-employed in Texas, or work for a large corporation in New Jersey (see an update below), then your state insurance regulators probably haven't been working for you.

The news that 15.8 million people can expect $1.3 billion in rebates from insurers this year because of the Affordable Care Act (ACA) underscores how weak health insurance regulation has been in states across the country. 

It may come as no surprise that Florida and Texas, two leaders in the fight against ACA, have been exposed as anti-consumer.  But they are not the only states with an anti-consumer bias.

First, the good news: last week, the federal government announced that three-quarters of us will get letters beginning on July 1 telling us that our insurance plans paid out at least 80 to 85 cents in benefits for every premium dollar they collected.

This means that under ACA they met the minimum standard for a reasonable benefit payout (which is still ten or more percentage points worse than the Medicare payout). 

But there’s bad news as well.

According to new data released recently by the Kaiser Family Foundation, 31% of consumers who purchase health insurance in the individual market, 28% who get insurance in the small group market, and 19% who get insurance through the large group market were covered by plans that failed to meet the minimum standard.

Assuming the Supreme Court upholds this most important consumer protection in the Affordable Care Act, all of these people are entitled to rebates.

The amount of the rebates will vary widely.  For example, over 2,700 Alaskans in one small group plan will get over $500 each.  Over 325,000 Floridians in thirteen individual market plans will get an average of $152.  And 46,000 Connecticut residents in three individual market plans will average almost $137 in rebates.    But people insured through the individual market in Maine won’t get anything – because they weren’t overcharged in the first place.

Until the Affordable Care Act passed, this type of insurance regulation was handled by the states. 

The new data give us a picture of which states have been looking out for consumers and which haven’t. 

Here’s a link to a table I created from the data showing what percentage of individual, small group, and large group customers will get rebates in all fifty states (excepting California) and the District of Columbia.

The two states that have done the best job in protecting the interests of state consumers are Hawaii and Rhode Island.  These are the only two states in which every health insurance plan met the minimum standard last year.

At least one plan in every other state falls short.  But New Mexico, South Dakota, Vermont, New Hampshire, North Dakota, Alabama, Alaska, Maine, and Oregon all protect well over 90% of their health insurance consumers.

However, in Florida alone, two dozen plans don’t meet the minimum standard.  Twenty-one fall short in Texas.

By far the worst state overall is New Jersey, where 62% of people covered in the individual market, 79% of those covered in the small group market, and 67% of those covered the large group market have been overcharged for their health insurance. (See an update below.)

Several other states aspire to New Jersey’s low standard. 

South Carolina and the District of Columbia have even worse consumer protection records than New Jersey in two of three areas.  And in Oklahoma, Arizona, and Texas, more than eight out of every ten consumers were overcharged in at least one of the three areas.

Who specifically is paying the price for this?

In Texas – where over 90% of those insured in the individual market were overcharged for insurance – it is people who are either self-employed or have chronic conditions which disqualify them from group coverage.

In Florida and Missouri, it is small business owners and employees.   In Florida, 73% of those covered in the small group market were overcharged for health insurance, and in Missouri, 72%.

Florida’s numbers are worse than the nation’s across the board – in addition to 73% of those in the small group market, 38% of those covered by individual plans and 37% of those covered by large group plans have been overcharged.

And Connecticut – home to the insurance capital of America – was worse than the nation as a whole in both the individual market and the large group market, where 42% and 28% were overcharged, respectively.

So should ACA consumer protections trump states’ rights?  In this case, I can think of 1.3 billion reasons why they had to.

Click here to see the full list of the states in the Kaiser rankings.

Update:  HHS released its final list of the states in June (available at this link).  The final national rebate numbers were amended downward somewhat - to 12.8 million customers receiving $1.1 billion in rebates.  As was pointed out to me by a New Jersey reader, some of the individual states' information changed dramatically in the final analysis - New Jersey's among them. The final New Jersey numbers were significantly lower than the initial Kaiser Family Foundation numbers.  $7.5 million in rebates will be given there - none in the small group market - placing New Jersey in the upper tier of states.