(Photo: Shutterstock)
Insurers estimate they will issue about $1.1 billion in medical loss ratio (MLR) rebates across all commercial markets in 2023, according to a new report from KFF. Final rebate data will be available later this year, and some insurers have not yet filed their 2023 rebate estimates.
The MLR provision of the Affordable Care Act limits the amount of premium income that insurers can keep for administration, marketing and profits. Insurers that fail to meet the applicable MLR threshold are required to pay back excess profits or margins in the form of rebates to their enrollees.
Recommended For You
In the individual and small group markets, insurers must spend at least 80% of their premium income on health care claims and quality improvement efforts, leaving the remaining 20% for administration, marketing expenses and profit. Large group insurers must spend at least 85% of their premium income on health care claims and quality improvement efforts.
MLR rebates are based on a three-year average, meaning that rebates issued in 2023 will be calculated using insurers' financial data from 2020, 2021 and 2022 and will go to people and businesses who bought health coverage in 2022.
The estimated $1.1 billion in rebates to be issued later this year will be larger than those issued in most previous years but fall far short of recent record-high rebate totals of $2.5 billion issued in 2020 and $2 billion issued in 2021, which coincided with the onset of the pandemic. The effects of the pandemic continue to be felt, because rebates this year include data from 2020 and 2021. In 2020, several factors drove down health spending and utilization:
- Hospitals and providers cancelled elective care early in the pandemic and during spikes in COVID-19 cases to free up hospital capacity, preserve supplies and mitigate the spread of the virus.
- Many consumers also chose to forego routine care in 2020 because of social distancing requirements or similar concerns
- Because insurers already had set their 2020 premiums ahead of the pandemic, many turned out to be overpriced relative to the amount of care their enrollees were using.
- Some insurers offered premium holidays, and many temporarily waived certain out-of-pocket costs, which had a downward effect on their rebates.
Another year of higher loss ratios in the individual market may point to further premium increases in 2024, because some insurers will aim for lower loss ratios to regain higher margins.
"In recent years, insurers in all markets had experienced a great deal of uncertainty in setting premiums during the pandemic," the report said. "Looking ahead to 2024, some of that uncertainty may continue, specifically relating to pent-up demand or the health effects of missed and delayed care. Additional uncertainty in premium setting may come from the Medicaid continuous coverage unwinding, as millions of people are expected to lose Medicaid coverage in the coming months and may transition to other sources of insurance.
"Increases in provider wages and other costs due to inflation could lead to higher premiums. In the 2023 rate filings, Marketplace insurer actuaries cited increase in prices and utilization as drivers of the premium increases."
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
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.
