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Small employers get shortchanged under rules for premium rebates

Everyone who has health insurance — whether individually or through their employer — may have recently received a premium rebate from their insurance provider due to the Affordable Care Act.

It’s pretty safe to say that the advance letters were less than consumer-friendly. Employers I talked to found that their costs to administer the rebates overshadowed their value.

Let me try to give you a clearer explanation.

In terms of individual or group health plans, insurance companies group their policyholders in “blocks” or “pools” of business. All of their individual policyholders are in one block of business, small employers are in another and large groups in another. Insurance companies track their profits or losses (claims) in each pool of business.

Under the Affordable Care Act, insurance companies are now required to spend 80 percent to 85 percent of premiums on claims. Insurance companies are also allowed under the Act’s provisions to calculate the percentage by averaging the entire amount of premiums paid in a particular block of business and by averaging the total paid out in claims.

The downside of using an average is that the rebate will be the same for people or employers regardless of how many claims they have actually had.

And this was even more a reality if you’re insured by United Healthcare in Arizona as their average for their block of small employers was one thousandth of one percent or .001, regardless of the premium paid.

So if you have a wellness plan that may have improved the health of some of your group and even controlled some of your claims, it was of little value.

This is a little surprising as United Healthcare has always been a proponent of wellness.

— Henry GrosJean, Phoenix

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