Halperin’s Take: Why ACA Rebates Are A Big Deal


From almost the moment the Affordable Care Act (a/k/a “ObamaCare”) was signed into law, the administration has been playing defense, trying to convince a skeptical public and a hostile Republican Party that the measure has some real benefits for real people.

The White House has touted some provisions that poll well, such as ensuring coverage for pre-existing conditions and keeping adult children on their parents’ health plans into their twenties. Nevertheless, the law overall remains unpopular with the American people.

But the rebate provision of the law — the fruits of the so-called “80/20 rule” — is about to kick in big time, as millions of Americans receive rebate checks or premium reductions from insurance companies who have failed to spend enough on patient care. This cash could be a true game changer in public attitudes about whether the law actually is beneficial and good public policy. The rebate provision of the law has been known and discussed in health care policy circles for months, but has largely flown below the radar in the political world and for voters—until now.

Health and Human Services Secretary Kathleen Sebelius explains the measure in a Friday blog post on the department website: “You can be sure that insurance companies are spending generally at least 80 cents of every dollar you pay in premiums on your health care or activities that improve health care quality,” she writes. “If the insurance company fails to meet this standard, or the ‘medical loss ratio,’ in any year, they have to pay you a rebate.”

The rebates must be processed no later than August 1st , but some have already gone out. On Friday, along with Secretary Sebelius’s post, the department released a sample letter that the insurance companies will forward, letting policyholders whose insurance companies failed to meet the 80% standard know how much they will be receiving.

Preliminary estimates from the Kaiser Family Foundation project that around 16 million policyholders will get a total of $1.3 billion in rebates. http://www.kff.org/healthreform/8305.cfm.

The rebates will average around $127 for the over 3 million individuals who receive them directly. Small employers covering almost 5 million people will receive around $377 million (an average break of $76), while larger employers covering about 7.5 million people will get approximately $541 million (an average of $72). According to administration officials, employers are obligated to pass those savings onto their employees.

As citizens and employers throughout the country receive their checks, the potential political impact in presidential battleground states could be significant:

Florida: 1,753,065 people get $148,589,661

Ohio: 211,930 people get $10,727,574

Virginia: 642,886 people get $40,896,992

Iowa: 66,040 people get $1,239,379

Colorado: 511,684 people get $25,725,984

Michigan: 144,542 people get $18,995,911

Nevada: 75,633 people get $8,771,820

Pennsylvania: 1,064,019 people get $104,533,779

New Hampshire: 3884 people get $244,132

The size of the checks will vary, but for many working Americans, they are likely to be the most tangible, and welcome, sign of the law’s benefits.

All of this is of great interest to the Obama-Biden campaign team in Chicago. During a recent discussion with senior campaign officials about their strategy to neutralize the law’s relative unpopularity, they cited the rebate checks as a stealth weapon to push public opinion back in the White House’s favor.

Democratic strategists are delighted that the cash – and letters of notification – will come from the insurance companies and not the government. That way, the administration can minimize the accusation that the President is trying to milk the money for political gain. At the same time, the HSS language leaves no ambiguity on why the (unpopular) insurance companies are issuing the refunds. The letters state, right at the top, “This rebate is required by the Affordable Care Act — the health reform law.”

Some in the insurance industry and critics of the law argue that other provisions of the measure will actually raise premiums overall. To counter that, the Obamans plan to tout the fact that many insurance companies changed their policies after the law passed to avoid paying the rebates. So in addition to the checks, they will argue that more people also are benefiting now from lower prices or better coverage. And letters will also go out to policyholders who aren’t getting rebates and who don’t work for self-insured employers, explaining the 80/20 provision to them.

The Affordable Care Act still is an issue Republicans are likely to highlight during the fall campaign, and one Democrats will continue to downplay. And in June, the Supreme Court is expected to rule on the law’s constitutionality, which will shake up utterly the political debate on the matter. But as the Obama campaign strives to make a case for the President’s first-term legacy, “the checks are in the mail” is a sweet phrase indeed.

Related Topics: 2012 Elections, Analysis, News, Special Report, The Page, White House

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