U.S. health insurers will be paying a record-breaking $1.3 billion in rebates to consumers this year based on their medical loss ratios for the prior three years. The amount, driven by the individual market, exceeds 2012's $1.1 billion in rebates and is nearly double the 2018 rebate total. The payment of rebates to consumers is based on the Patient Protection and Affordable Care Act's 80-20 medical loss ratio formula. The Act requires insurers in the individual and small group markets to pay the rebates if they do not spend 80 percent of premium revenue on health care and quality improvement. The insurers are limited to using 20 percent of revenue for profits, marketing and administration. (The ratio for large group insurers is 85-15.) Rebates can be remitted as premium credits or lump-sum payments. Related: UnitedHealth's MLR rebates to employers soar 40 percent The Kaiser Family Foundation crunched data from the Centers for Medicare and Medicaid Services to arrive at the total rebates. The rebate, which dwarfs last year's $707 million, demonstrates that, at least for individual coverage, insurers have adjusted to the Act's requirements and have returned to solid profitability. "As our previous analysis of insurer financial performance found, in 2016, insurers in the individual market were operating with significant losses on average, but by 2017 financial performance in the market had begun to stabilize as premiums rose. Insurers in 2018 were highly profitable and arguably overpriced, which is why rebates are so large despite being averaged across less favorable years (2016 and 2017)," KFF said in an issue brief. For individuals, insurers are scheduled to rebate $743 million--exceeding the rebate total for all three groups last year. Small and large group rebates ($250 million and $284 million respectively) were more in line with prior years, KFF found. And while issuing rebates to consumers is relatively straightforward, KFF said some corporations and plan members may not even see a rebate due to the different formula for employer plans. "In the case of employer-sponsored insurance plans, the cost of coverage is often split between the employer and employees. Therefore, for many employer-sponsored plans, the handling of refunds to employers and employees may depend on the plan's contract and the manner in which the policyholder and participants share premium costs. If the amount of the rebate is exceptionally small ("de minimis", $5 for individual rebates and $20 for group rebates), insurers are not required to process the rebate, as it may not warrant the administrative burden required to do so," the study found. KFF noted that rebates will vary by state. Large and small group plans in Florida will receive the highest rebates, according to the analysis. Next year, consumers can anticipate another record or near-record rebate year, Kaiser said. "So far in 2019, insurer financial performance in the individual market remains strong, despite the effective repeal of the individual mandate penalty effective this year. It is likely that individual market insurers will continue to owe large rebates next year, in September 2020, as the rebate calculation at that time will be based on 2017, 2018, and 2019, and will no longer include a year with significant losses." Read more: 

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