Insurers to pay $1 billion in ACA rebates

Health care consumers can look forward to receiving $1 billion in rebates this fall under an Affordable Care Act provision that requires insurers to spend the bulk of customers’ premium payments on care.

Rebates are based on insurers’ experiences over the previous three years, according to a KFF report. This year’s total is roughly half the size of last year’s $2 billion, in part because 2021 was a less profitable year and because the three-year window no longer includes 2018. That was when individual market insurers overpriced ACA marketplace plans because of uncertainty caused by the repeal-and-replace debate and other ACA policies.

This year’s rebates continue to reflect the impact of the COVID-19 pandemic, which led to a sharp reduction in health claims in 2020, when many people skipped care amid stay-at-home orders and medical offices’ closures.

Rebate amounts will vary by market:

• Individual market insurers are expected to pay an estimated $603 million in rebates to more than four million people, including many covered through the ACA’s Marketplaces.
• Small- and large-group insurers are expected to pay about $275 million and $168 million respectively to plans that cover about four million additional people.

The amounts are preliminary estimates, with final rebate data coming later this year. The rebates are the result of insurance companies not meeting the ACA’s medical loss ratio threshold, which requires them to spend at least 80 percent of premium revenues (85 percent for large-group plans) on health-care claims or quality improvement activities. Higher loss ratios in 2021 could lead to steeper premium increases next year as some insurers try to regain higher margins.

“The ACA never did much to reduce the rate of increase in national health spending, but it did a lot to make health care more affordable for consumers, from subsidizing coverage to protecting people with pre-existing conditions to requiring these rebates from insurers,” said Drew Altman, KFF president and CEO.

Not all policy holders are due rebates, but among those who are, this year’s rebates work out to roughly $141 per plan member in the individual market, $155 per member in the small group market and $78 per member in the large-group market, according to analysis of preliminary data reported by insurers to the National Association of Insurance Commissioners.

Insurers will issue the rebates to eligible consumers in the fall.