Texas health insurance rebates are on the line

Startlegram ^ | 1-13-2012 | Mitchell Schnurman

[Dysart]

It sounds too good to be true, and if Texas regulators have their way, it won't happen.

About 690,000 consumers are slated to get an estimated $160 million in rebates from health insurance companies by Aug. 1. But the Texas Insurance Department wants to slash that amount by three-fourths and phase in changes slowly.

The department says the individual insurance market could be destabilized if companies have to make the payments and cut into profits. Consumer groups say that everything will be fine and that customers deserve their full refunds. A federal decision is expected within two weeks.

The rebates are part of the 2010 federal healthcare law, under attack by Texas and other states and headed to the Supreme Court. It requires insurers to spend at least 80 percent of premium revenue on health services and quality improvements, with a goal of getting more value from every healthcare dollar.

In effect, the law caps overhead costs for insurers at 15 percent for large groups and 20 percent for the individual market. Anything larger has to be rebated to customers in the following year.

This is particularly rich territory in Texas, because the state regulates insurers with such a light hand.