OAKLAND, Calif., April 26 (UPI) -- Early estimates indicate U.S. insurance firms will pay $1.3 billion in rebates in 2012 for non-compliance with a new federal statute, a watchdog group said.
The Affordable Care Act that began in 2011 stipulates large insurers must return 85 percent of premium dollars to customers and smaller firms must reach an 80 percent threshold, the Kaiser Family Foundation said in a statement Thursday.
The law says no more than 20 percent and 15 percent of premiums, respectively, can be used to cover administrative costs or for company profits.
Preliminary estimates indicate insurers will pay rebates of $541 million in the large employer market, $377 million in the smaller business market and $426 million in the individual insurance market, the foundation said.
As many as 92 percent of individual policy holders in Texas and 86 percent in Oklahoma can expect rebates while individuals in several other states can expect no rebate, the group said.
Nationwide, 215 insurance plans expect to issue rebates to 3.4 million individual market customers.
The largest per-person rebates are expected in Alaska, Maryland and Pennsylvania with rebates averaging $305, $294 and $243, respectively.
The 80 percent and 85 percent thresholds are known as the industry's medical loss ratio.
The rebates are expected by August, the statement said.