CIGNA, a large group employer, owes Vermonters more than $2.3 million in rebates on health insurance premiums, under a provision of the new Affordable Care Act.
Checks averaging $807 will be sent out tomorrow to businesses that insured more than 4,600 Vermonters. According to the New York Times, Vermonters will receive more on a per capita basis than consumers in any other state.
Steve Kimbell, commissioner of the Vermont Department of Financial Regulation, says that’s because the insurer, CIGNA only sold premiums to the large group market in Vermont. Under the Affordable Care Act, insurers must spend 85 percent of the money they receive from premiums on medical care. In other states, where the insurers have also sold premiums in the small group market, the rate is 80 percent, he said.
CIGNA is the only health insurer in Vermont that did not meet the new threshold under the law.
Nationwide, insurers like Golden Rule and CIGNA must return a total of $1.1 billion to 12.8 million Americans. The average rebate is $151 per household.
The money must be returned to businesses by Aug. 1.
“There are a lot of things about the Affordable Care Act that are not generating a lot of headlines that people are going to like and this is one of them,” Kimbell said. “Another is the insurance of children up to age 26.”
Anya Rader Wallack, chair of the Green Mountain Care Board, which is instituting new reforms to Vermont’s health care system, says the Affordable Care Act provision “creates an important threshold in that market and makes sure insurance premiums are spent on health care and not on administrative costs.”
Most people get insurance through their employers. The refunds will be returned to the companies that paid the premiums. The businesses can then give refunds to workers or use the money to pay down future premiums.
Kimbell said it would be too difficult to require employers to return money directly to employees because there is so much variation in premium payments from business to business.
“If they budgeted the money for insurance and they’re getting some of it back, some sharing is appropriate but it’s not a legal requirement,” Kimbell said.
The state does not closely regulate the large group market. That’s because the Legislature decided in 1991 that these markets have big enough pools that the cost of sick individuals in the system is spread out, according to Kimbell. They are, in effect, community rated within their own group.
Kimbell estimates that about 15,000 Vermonters, including state workers, are insured by CIGNA. (About a third are eligible for premium rebates.) The company lost a contract with the Vermont Association of Chambers of Commerce Executives on Jan. 1. In 2010, CIGNA insured about 31,646 Vermont residents.
Officials from CIGNA could not be reached for comment.
