Since the beginning of the COVID-19 pandemic, which saw health care utilization crater — and insurer margins grow as a result — payers have refunded billions of dollars to members and plan sponsors. Experts say that the premium rebate trend is primarily driven by the desire of payers to manage cash flow and future medical loss ratio (MLR) obligations, but is also likely an attempt by insurers to improve their public image as the prospect of major health care legislation looms after the election.
The Affordable Care Act (ACA) MLR rules require commercial insurers to spend at least 80% of their premium revenue from individual and small group plans and 85% of their large-group revenue on claims and quality improvement. The ACA requires any profits above those rates to be rebated to plan members. MLR rebate amounts are calculated on a rolling three-year average, meaning financial figures from 2017 to 2019 are the basis of 2020’s MLR calculations. Rebates accrued in a given plan year must be paid out by Sept. 30 of the following year.