Your Health Insurance Company Owes You Money

Have you received your health insurance rebate yet? No? Well, don’t hold your breath. By law, the health insurance companies have three years before they have to repay you.

Before we get into why you are owed money, let’s take a look at how insurance works. Insurance is a way of managing risk. It started centuries ago in Europe as a way to prevent trading companies from going bankrupt if their treasure ships did not make it back to port. In the modern world, we take out insurance on a lot of things such as our homes, our cars, our businesses and our health expenses.

The way that insurance works is that an insurance company estimates what they may have to pay out to cover losses and then issues a policy, the cost of which is supposed to cover the cost of that possible loss. Plus a little extra for overhead. When it comes to health insurance, the companies estimate how much they will have to pay out in medical claims and charges premiums accordingly. Plus that little extra for overhead.

Before the ACA (Affordable Care Act), health insurance companies were in the business of making money, not covering medical expenses. They charged premiums depending on how old you were, your gender, where you lived, your chronic health conditions, etc. They were free to refuse to cover anyone that they deemed had too many medical expenses. They could also refuse to cover pre-existing medical conditions. If you never had medical insurance and got sick, you were out of luck. It was considered a pre-existing condition and not covered. If you changed jobs after developing a chronic medical condition, you were out of luck. Also a pre-existing condition and also not covered.

Health insurance companies made a lot of money insuring people who used the least amount of medical services and charging people with expensive medical conditions exorbitant premiums or refusing to cover them at all. And that little extra to cover overhead grew. CEOs of health insurance companies make tens of millions of dollars in compensation. Every year.

One of the ways that the ACA made health insurance affordable was to limit how much health insurance companies could charge for premiums and strictly controlled how much they could keep of the premiums for marketing costs, paying exorbitant salaries and profit. They must use 80% — 85% of premiums (depending on whether the policy is for an individual or small business or a larger corporation) to cover medical claims. They are only allowed to keep 15% — 20% of premiums for themselves. Still a lot if you ask me, but I have never been a fan of anyone profiting off of the illness or injury of other people.

Here’s how health insurance companies could owe their policy holders money. If they pay out less than 80% — 85% of their premiums on medical claims, by law they must return that money to their policy holders. In other words, you paid too much and are owed a refund.

So why, during a pandemic when hospitals are overflowing with patients, are the health insurance companies not paying out as much as usual in medical claims? Because people are not consuming as much healthcare. Elective surgeries have been cancelled. Cancer treatments have been cancelled. Fertility treatments have been cancelled. Children are not getting their vaccinations. Women are not getting mammograms. Everyone is staying away from doctors’ offices and hospitals because they are afraid of the virus.

The end result is that your health insurance company is not paying out anywhere near 80% — 85% of your premiums on medical claims. So they owe you money.

And that three years that you have to wait to get your money back? That’s to give the health insurance companies time to figure out how much they paid versus how much they owe.

Here’s what really infuriates me.

Millions of Americans are out of work. They are sitting for hours in lines at food pantries because they can’t afford to feed their families. They may lose their homes through eviction or foreclosure now that the $600 weekly unemployment benefit is no longer being paid and moratoriums on evictions have been lifted.

While those exorbitantly overpaid CEOs still have jobs and paychecks.

While that extra money that is rightfully ours is not only being withheld, but while it is being withheld, it is being invested for the benefit of the health insurance companies.

And policy holders are not getting even a temporary reduction in their premiums.