Friday, April 27, 2012

Yeah, about those MLR "rebates..."

As we've previously noted, when something looks "too good to be true," it generally is. Case in point, the now-estimated $1.3 billion in "rebates" headed towards "lucky" Americans later this summer:

"The nonpartisan [sic] Kaiser Family Foundation, which calculated total rebates at $1.3 billion, says that around $426 million will go to people who bought their own health plans; $541 million will go to large employers and $377 million to small businesses ... Goldman Sachs analyst Matthew Borsch estimated the total rebates at around $1.2 billion."

Hey, what's a few million dollars between friends, really?

The rub here is several fold. First, only fully insured plans are subject to the requirement (as Nate breathes a sigh of relief); since most large employers are self-funded, their plans are exempt (well, for as long as HHS Secretary Shecantbeserious says they are).

Second, we're talking about an average payout of about $127 per policyholder; it's unclear if that's per insured, or just to the premium payer. And don't just assume the latter: with this bunch, no such assumptions are safe.

Third, there's the little issue of taxes: if you're an individual, chances are your refund's going to be non-taxable (unless you've set up a Section 105 plan). But if you're part of a group plan, and your premiums come out pre-tax (such as under a Flexible Spending or POP Account), it appears that you'll be on the hook. And at a measly $127, don't bother waiting by the mailbox for a 1099.

Continuing on for those in group plans, there's the little matter of enforcement. That is, these checks will be going to the employer, not the employees individually. It's up to that employer to distribute the cash. Which presents two more little wrinkles:

How are the employees going to know whether or not that check actually arrived, and how much it was? And how do they make the employer cough it up? Lawsuits for $127?

And from the employer's perspective: how are they supposed to find Sally Jones, who left the company in early 2011? That's over a year before the checks go into the mail, and with our transient society, who knows where she ended up?

Good times, good times.
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