Health insurance companies are getting ready to disburse a record $1.3 billion in medical loss ratio (MLR) rebates, according to an analysis by the Kaiser Family Foundation.
The $1.3 billion surpasses the previous rebate record of $1.1 billion, issued in 2012.
The increase is driven largely by individual market insurers who will pay $743 million in rebates this year, according to the report, which analyzed insurer data submitted to the Centers for Medicare & Medicaid Services. Rebates in the small-group and large-group insurance markets are similar to previous years, with expected paybacks of $250 million from small- and $284 million from large-group markets, according to the Kaiser report. Insurance companies have until September 30, 2019, to start issuing rebates.
The rebates stem from the MLR requirement imposed by the Affordable Care Act (ACA), which limits the amount of premium dollars that can be used for administration, marketing, and profit. Under the health law, companies are required to publicly report how much they spend on health care, quality improvement, and other activities using premium funds. Individual and small-group market insurers must spend at least 80% on health care claims and quality improvement,while large-group plans must spend at least 85%. Rebates are based on a 3-year average of financial data by each insurer.
Patients in the individual insurance market can expect their rebate in either a premium credit or a check. In the large and small group markets, rebates may be split between employee and employer depending on the plan contract.
The volume of rebates differed greatly across the states, with some states paying zero rebates and others paying millions. Virginia insurers for example, will pay the highest number of total rebates ($150 million), followed by Pennsylvania ($130 million) and Florida ($107 million), according to the report. Payments by insurers in the individual market alone ranged from zero dollars in 13 states to $111 million in Virginia. Individual market insurers in Arizona will pay $92 million in rebates to patients, while individual plans in Texas will pay $80 million. Florida insurers will pay the highest in rebates in both the small-group and large-group market at $44 million and $42 million respectively.
The largest rebates within the individual market will come from Centene, HCSC, Cigna, and Highmark. Authors of the report noted that these insurers tend to have higher enrollment and are active in multiple states.
Individual marketplace insurers will likely pay high rebates against next year, based on an individual market that remains strong and profitable, despite the recent elimination of the individual mandate penalty, according to the authors.