Until this year, individual health plans were not required to set any percentage of premiums aside to directly cover the medical care of their members. As a result, those who had to buy health insurance had little way of knowing whether the money they paid into their Individual Health Plans went directly back into the health care industry – or into the pockets of insurance company executives.
To remedy this problem, the Department of Health and Human Services will now be requiring all individual health plans to spend a certain amount of their premium income directly on medical care, rather than on administrative and marketing costs.
Rebates Coming for Some Health Plan Members
In addition to the spending requirements, the HHS recently announced that individual health plans that do not work within the guidelines will be required to pay rebates back to their customers. For up to nine million members of individual health insurance companies, the rebate check could average as much as $164.
This additional rule was made with the effort to hold individual insurance plans accountable for the way they spend their members' money. It also gives people peace of mind when they must buy health insurance; now they know how much of their premium will go directly to their medical care.
What the Rule Says
Most individual health plans will be required to spend 80 cents of every dollar directly on health care services. If the individual health plan of a company covers more than 50 employees, the amount goes up to 85 cents.
The rules were originally designed to prevent wasteful spending by individual health plans on unnecessary overhead and executive bonuses. The hope is that these requirements will add value to individual health plans. When someone has to buy medical insurance, he will receive the biggest healthcare bang for his premium buck.
Currently, there are no minimum requirements in effect for individual health plans. By some estimates, there may be some individual health insurance companies that spend as little as 60% of their total premium income to actually enhance the quality of medical care their members receive! Most consumer groups agree that the 80-85% range is a fair requirement that allows individual health plans to adequately cover their overhead costs while serving their members in the best way possible.
Exceptions to the Rule
There will be some companies that will find themselves exempt from the minimum spending requirements and the rebate mandates. These exceptions include individual health plans with fewer than 1,000 enrollees, which will not be required to issue rebates to members. Companies with fewer than 75,000 enrollees may also receive an adjustment in the percentage amount. Limited plans available in industries like food service may also have an exemption status granted.
People who must buy health insurance in the future can now rest assured that the money they spend on premiums will go directly to the quality of the health care they receive. When individual health plans are held accountable, consumers will benefit.