KFF: Insurers could pay out $2.7B in medical loss ratio rebates this year

Health plans are likely to pay out $2.7 billion in premium rebates this fall—nearly doubling the record total paid out last year, a new report shows. 

The Kaiser Family Foundation projects that most of that money, about $2 billion, will be paid out to individual market consumers, with $348 million in payments for the small group market and $341 million in the large group market. 

Under the Affordable Care Act (ACA), insurers in the individual and small group markets must put 80% of premium revenue toward paying medical claims and improving quality. In the large group market, the medical loss ratio (MLR) is 85%. 

RELATED: Insurers owe $1.3B in medical loss ratio rebates for 2019—KFF  

MLR rebates are based on a three-year average, so 2020 payments would be based on data from 2017, 2018 and 2019. Health plans’ performance in the individual markets proved quite profitable in 2018 and 2019 after political uncertainty around the potential repeal of the ACA drove up premiums, the researchers said. 

As the data are based on multiple years, the impacts of COVID-19 this year won’t be calculated in isolation, according to the announcement. 

“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,” the researchers said. 

Rebates for the individual market will be paid out to more than 4.7 million people, equaling about $420 per person. In the small group market, rebates would be $1,850 per member, while in the large group market they’d total $110 per member, according to the report. 

While rebates on individual market plans have grown significantly of late, rebates in small and large group markets were more on par with the past several years, the researchers said. 

Overall rebates hit a low of $300 million in 2014 as health plans on the markets struggled.