Across the country, health insurance companies will pay an estimated $1.3 billion in rebates to their policyholders later this year, under a provision of the 2010 Patient Protection and Affordable Care Act that penalizes health-care plans that don’t pay out enough of their premium revenues for health services. In Iowa, insurers are expected to pay out more than $1.2 million in rebates. (see table)

The rebates are calculated based on whether the company met minimum medical loss ratio requirements in 2011. The names of companies that owe rebates are expected to be released in June.

Under the federal health-care law, health insurance companies must spend at least 80 percent of the premiums they take in on health-care expenses or quality improvements, rather than on administrative costs. This so-called medical loss ratio threshold is higher for large-group plans, which must spend at least 85 percent of premium income on claims or quality improvements. The ratio is calculated by dividing health-care claims and quality improvement expenses by the insurers’ premium income minus taxes and regulatory fees.

Wellmark Blue Cross and Blue Shield, the state’s dominant health insurer with an estimated 84 percent market share, said that its medical loss ratios exceed the minimum requirements and that it will not owe rebates.

Unless this portion of the federal law is overturned by the U.S. Supreme Court, the rebates will be payable on Aug. 1 by insurers.