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Is a significant amount of money coming your way?
Key Point
- The insurer will pay out $1 billion in rebates by the end of September.
- The average person who receives a rebate can expect a payday of $78 to $155.
- Consider using that money for an emergency count, health savings account, or paying off debt.
Health insurance companies must follow certain rules. One such rule is to stick to medical loss rates, which require at least 80% of the money collected to be spent as insurance premiums for medical expenses and costs related to the patient’s health.
Insurers that do not meet that standard cannot keep the extra money. Instead, they are forced to repay policyholders in the form of rebates.
That’s what’s happening this year. Health insurers will pay him $1 billion in kickbacks by the end of September, according to recent estimates from the Kaiser Family Foundation.
The average user of the Marketplace plan can expect a rebate of $141. On the other hand, large group plan participants can expect an average of $78 and small group plan participants $155.
If you’re getting kickbacks from your health insurance company this month, you might be tempted to splurge on that money.
1. Increase your emergency fund
Do you have enough money in your savings account to cover at least three full months of living expenses? If not, any additional money should be deposited directly into your bank. You never know when you might lose your job or have an unscheduled bill. If you need emergency funds, we recommend depositing a rebate check with the bank to get you closer to your savings goal.
2. Gradually reduce your debt
If you have $3,000 in credit card debt and you get a $141 check from your health insurance company, you might think that using that money to pay off your debt won’t make much of a difference. But in reality it will. Any amount you can afford to pay for the debt will save you some extra interest. So even if you’re looking at a difficult balance to pay off, it’s worth using a rebate for that purpose.
3. Fund your health savings account
If you have health insurance with a high annual deductible, you may be eligible to participate in a Health Savings Account (HSA). HSA provides tax incentives for short-term and long-term medical expenses. Not only is the money you invest tax deductible, but if you don’t need it right away, you can invest it and grow it to a larger amount. This is money that will be available in the future should you encounter a medical problem that will cost you a lot of money.
make the most of that money
The fact that health insurance companies are responsible for not overcharging participants is a good thing. If you have money set aside for , you might be tempted to do something fun with your rebates. Otherwise, figure out how you can use that money to improve your overall financial situation.
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