Insurers Expect to Pay Record $1.3B in Rebates

Private insurance companies are expecting to pay out a record of at least $1.3 billion in rebates to consumers this fall across all markets, surpassing the previous record high of $1.1 billion in 2012, according to a new study by the Henry J. Kaiser Family Foundation (KFF).

The amount varies by market, with insurers reporting at least $743 million in the individual market, $250 million in the small group market, and $284 million in the large group market, according to analysis of data reported by insurers to CMS.

The Medical Loss Ratio (or MLR) requirement of the ACA limits the portion of premium dollars health insurers may use for administration, marketing, and profits. Under the ACA, health insurers must publicly report the portion of premium dollars spent on healthcare and quality improvement and other activities in each state in which they operate. The MLR provision requires insurance companies that cover individuals and small businesses to spend at least 80% of their premium income on healthcare claims and quality improvement, leaving the remaining 20% for administration, marketing, and profit.

Rebates are the result of insurance companies not meeting the ACA’s medical loss ratio threshold. By law, insurers have until September 30 to begin issuing rebates.

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Rebates will vary by state. The states with the largest expected rebates in total include Virginia ($149.6 million), Pennsylvania ($130 million), and Florida ($107.4 million). In about 13 states, insurers are not expecting to pay any rebates at all.

In the individual market alone, insurers will pay out the highest rebates in Virginia ($111.3 million), followed by Arizona ($92.3 million), and Texas ($80.4 million). On a per subscriber basis, insurers will pay the highest rebates in Pennsylvania ($990 per subscriber), Virginia ($770 per subscriber), and Minnesota ($670). Virginia ranks high largely because one insurer, Sentara (also known as Optima), had the highest individual premiums in the country in 2018 and now owes especially large rebates

Rebates also will vary by insurer. Other insurers issuing large rebates across the individual market include Centene (at least $216.9 million), HCSC ($78.5 million), Cigna ($55.9 million), and Highmark ($50.8 million). These insurers tend to have high enrollment and participate in a number of states.

Payers may issue the rebates in the form of a check to consumers or as a credit applied to the premiums consumers must pay. For people with employer coverage, the rebate may be shared between the employer and employee.