Consumers are expected to reap the rewards of excessive premiums over the last few years, according to a new analysis from the Kaiser Family Foundation that said premium rebates should hit a record $2.7 billion this fall.
The result of the Affordable Care Act’s medical loss ratio provision, which requires insurers to spend at least 80 percent of their premium income (85 percent for large group plans) on claims and quality improvement over the past three years, the rebate total last year was $1.3 billion—a record at the time.
But this year is expected to come in at more than twice that amount. Insurers that fail to spend the required amount on claims and quality improvement are obligated to refund the difference as rebates.
Individual market insurers are the ones on the hook for the bulk of the refunds—a total of nearly $2 billion, according to preliminary estimates. That will result in an average refund of $420 per customer in that market, after excessively high premiums based on fears about the marketplaces and possible repeal of the ACA in 2018 and 2019, which turned out to be highly profitable, meant that insurers did not meet the required spending thresholds.
The money may come in the form of checks to consumers or instead be applied as a credit to premiums they have to pay. For those who are covered through their employers, the rebate may end up getting split between employer and employee.
Because of the millions of people losing both their jobs and their health coverage this year, qualifying them for a special enrollment period, it’s expected that enrollment in individual market plans will rise—although these same people wouldn’t qualify for rebates issued this year unless they were also enrolled in 2019.
Final information on the dollar amount of rebates will be issued in the fall.
While no information is yet available on the potential for 2020, the coronavirus effect on coverage will undoubtedly have some influence on rate setting for 2021. While the cost to insurers for covering coronavirus treatment are still unknown, it could amount to tens if not hundreds of billions of dollars, the report says.
However, despite that, the fact remains that hospitals and outpatient offices are canceling elective procedures and people are delaying or forgoing other care because of worries over getting the virus and reduced access to care because of the need for social distancing. The report points out that “Even if individual market insurers experience losses in 2020, it is entirely possible they will owe rebates in 2021 because those rebates will be based on 2018 and 2019 experience as well.”