This year's rebates work out to roughly $299 per plan member in the individual market, $127 per member in the small-group market and $95 per member in the large-group market.
Private insurance companies expect to pay more than $2 billion in rebates to consumers under the Affordable Care Act this fall. This would be the second-highest amount ever issued, according to a Kaiser Family Foundation analysis.
The rebates, which are calculated based on the share of premium revenues that insurance companies paid out for health care expenses and quality improvement, are roughly $400 million lower than last year's record high of $2.5 billion but more than 50% higher than the $1.4 billion insurers sent back to policyholders in 2019.
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Rebate amounts will vary by market. Individual market insurers account for the majority of payments, with expected rebates of at least $1.5 billion, analysis of data reported by insurers to the Centers for Medicare and Medicaid Services shows. Rebates in small- and large-group markets are expected to be $308 million and $310 million, respectively. The amounts are preliminary estimates, with final rebate data coming later this year.
"The rebates are the result of insurance companies not meeting the ACA's medical loss ratio threshold, which requires insurers to spend at least 80% of premium revenues (85% for large-group plans) on health care claims or quality improvement activities," the report said. "Most people in large-group plans are in self-insured plans, which the MLR threshold rule does not apply to."
Not all policyholders are due rebates, but among those who are, this year's rebates work out to roughly $299 per plan member in the individual market, $127 per member in the small-group market and $95 per member in the large-group market. By law, insurance companies must begin issuing the latest rebates to eligible consumers later this fall.
"One reason some companies failed to meet the threshold in 2020 is that the pandemic drove health spending and utilization down, as providers canceled elective procedures and consumers opted to forego routine care out of fear of being infected," the report said. "As a result, insurers generated higher levels of profits than they had anticipated when they set their 2020 premiums well before the pandemic emerged. Overall rebates would have been even higher had some insurers not taken steps to increase their claims costs relative to their premium income, including offering premium holidays and waiving certain out-of-pocket costs for enrollees, such as costs for telemedicine and for treatment for COVID-19. Claims costs also began to rise toward the end of the year during the winter surge in COVID-19 cases."
Rebates are calculated using a three-year average, so the amounts are not only a side effect of the pandemic. In the individual market, this year's rebates are driven in large part by significant insurer profits in 2018 and 2019.
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Alan Goforth
Alan Goforth is a freelance writer in suburban Kansas City. In addition to freelancing for several publications, he has written a dozen books about sports and other topics.
