The medical loss ratio rules within the Affordable Care Act require individual and small group health insurers to spend at least 80 percent of premiums on medical claims or improvements; large group insurers must spend at least 85 percent. This limits the amount an insurance company can spend on administration and profits. The rebate is subtracted from insurance companies’ taxable income.
For 2012, consumers will receive $500 million in rebates due to this rule. They will average about $100 per family, and will be sent on August 1. This rebate is significantly less than the $1.1 billion rebate paid in 2011 as insurers are becoming more efficient.