When Kathy Averback first saw the check, she didn't believe it was real.
Late last month, Aetna, her health insurer, told her it was refunding $1,044.32 of the money that she and her husband paid for a separate policy for their teenage son, who had a pre-existing condition: hay fever.
Aetna told Averback, a freelance writer in Huntingdon Valley, that it was sending her the money because of the Affordable Care Act, aka Obamacare. The law requires that insurers spend 80 percent of premium dollars on actual health care and quality improvement, not administration, or pay a rebate. (The threshold is 85 percent for plans with more than 50 people.)
In the Pennsylvania individual market, Aetna Life Insurance Co., which also sells health insurance, spent just 67.1 percent of the money collected from subscribers in 2011 on health care. Averback's check was a rebate.
Once she realized that the check was real, she had another thought. "I guess that shows you how much they were ripping me off," she said.
Averback, who is thankful for the reform law, put the check in her son's college fund. He's a freshman at Temple University.
By Aug. 1, nearly 13 million people were told that they or their employers would receive $1.1 billion in rebates because of the new law. The government's hope is that the requirement will lead either to lower insurance prices or, at the very least, insurance plans that give subscribers more for their money.
Ethan Rome, executive director of Health Care for America Now, a pro-health reform group, said he hopes the law changes insurers' behavior. "It's to stop price gouging," he said. "It's to spend less money on administration, bloated CEO salaries and profits."
Walt Cherniak, a spokesman for Aetna, which paid $106 million in rebates nationwide, said the law makes it harder for the company to reduce medical costs by developing new approaches to promote employee wellness or detect insurance fraud. His company, he said, believes the government should "encourage investment in technologies, programs and other innovations that could address rising medical costs."
People who bought their own insurance have already gotten their checks. When insurance was purchased by a group, typically an employer, the money goes to whoever bought the insurance. The average payments are low, about $150 a family. Companies are required to use the money in a way that benefits employees in the plan, possibly by reducing future premiums or giving employees a cash rebate. The rules are complicated and the enforcement mechanism is unclear, but employees who pay for part of the cost of their insurance could get an equal part of the rebate.
Rules on the so-called Medical Loss Ratio do not apply to companies that self-insure.
According to the federal government, about 45,000 New Jersey residents will benefit from $7.7 million in rebates. In Pennsylvania, about 575,000 residents will benefit from $51.6 million in rebates.
Aetna and Independence Blue Cross, the region's dominant health insurers, also paid the most in rebates. Aetna's refunds totaled $20.3 million and rebates for Keystone Health Plan East, an IBC plan, were $17.8 million. Nippon Life Insurance Co. of America paid the largest penalty in New Jersey: $4.1 million to large group plans.
Independence said it issued rebate checks to 2,600 large groups that bought insurance for about 145,000 subscribers of its Keystone Health Plan East insurance. Overall, IBC has 3.1 million subscribers.
Mike Colarusso, a managing consultant with Charon Planning, an employee benefits consulting firm in Warrington, estimates that about 15 percent of his clients have gotten rebate checks, ranging from $300 to $400,000 for a company.
He has told clients that businesses have a fiduciary responsibility to distribute the rebates fairly. He recommends that employers distribute the rebates proportionately. The amount due to each employee is likely to be small.
Companies could write a check or they could use the rebates to offset upcoming insurance expenses. There is no requirement that employees have a say in how the money is distributed.
A Department of Labor spokesman said that employees who suspect they are not benefitting from a rebate provided to their company can contact the Employee Benefits Security Administration at www.askebsa.dol.gov or 1-866-444-3272.
Like Averback, Dale Shillito, a retired census bureau worker who lives in Philadelphia's Spring Garden section, was "very surprised" to get a $375 rebate from Aetna. He likes that the new law "keeps everybody honest."
Not long after he got the rebate check, he got another envelope from Aetna. That letter said his $301-a-month bill was going up by $22 a month.
Contact staff writer Stacey Burling at 215-854-4944 or email@example.com.