Private Insurers Are Expected to Pay $2.1 Billion in Rebates to Consumers This Year for Excessive Health Insurance Premiums Relative to Health Care Expenses

According to a new KFF analysis, private insurance companies expect to pay out discounts of 2.1 billion US dollars to consumers in the fall. This is the second highest amount ever spent under the Affordable Care Act.

The rebates, which are calculated based on the percentage of premium income insurance companies have paid for health care spending and quality improvements, are roughly $ 400 million below the previous year's record high of $ 2.5 billion, but more than 50 percent above the $ 1.4 billion insurer that was returned to policyholders in 2019.

The discount amounts vary depending on the market. Individual market insurers make up the bulk of the payments, with discounts expected to be at least $ 1.5 billion. This comes from analyzing the data that insurers reported to the Centers for Medicare and Medicaid Services. Discounts in the small and large group insurance markets are expected to be $ 308 million and $ 310 million, respectively. The amounts are preliminary estimates. The final discount dates will be published later this year.

The discounts are the result of insurance companies failing to meet the ACA medical claims ratio threshold. As a result, insurers must spend at least 80 percent of premium income (85% for large group plans) on health care claims or quality improvement activities. Most of the people in large group plans are on self-insured plans, which the MLR threshold rule does not apply to.

Discounts are not due to all policyholders, but among those who do, this year's discounts are approximately $ 299 per plan member in the single market, $ 127 per member in the small group market, and $ 95 per member in the large market Group analysis of the KFF. According to the law, insurance companies are required to give out the latest discounts to eligible consumers starting this fall.

One reason some companies failed to hit the 2020 threshold is because the pandemic has reduced health spending and utilization as providers canceled voting processes and consumers foregoing routine care for fear of infection . As a result, insurers achieved higher than expected profits when they set their premiums for 2020 well before the pandemic broke out. Overall, the discounts would have been even higher if some insurers had not taken steps to increase their claims costs in relation to their premium income, including offering premium vacations and foregoing certain out-of-pocket expenses for participants, such as travel expenses. B. Costs for telemedicine and for the treatment of COVID -19. Damage costs also rose towards the end of the year during the winter surge in COVID-19 cases.

Discounts are calculated on a three-year average, so the big discounts aren't just a side effect of the pandemic. In the individual market, this year's rebates are in large part due to significant profits made by insurers in 2018 and 2019 (as rebates granted in 2021 are based on insurers' financial performance in 2018, 2019 and 2020).

Further data and analyzes on the pandemic, the financial performance of the insurers and the ACA can be found at kff.org.