Health Insurance Rebates To Reach All-Time High

A provision of the Affordable Care Act, also known as Obamacare, is expected to net all-time high rebates for health-insurance customers in 2019.

Since 2012, health-insurance companies have been required to give customers medical loss ratio (MLR) rebates each fall if the company does not spend 80-85 percent of premium dollars on health services.

The provision to ACA was sponsored by former Minnesota Sen. Al Franken and requires health insurers must spend most of the premium dollars collected on actual health care or return the money to plan participants.

In 2018 in Texas, 54,851 health-insurance customers received just over $7.8 million in rebates with an average of $142 per rebate.

Various health-insurance companies that did not reach the MLR goals this year are sending out rebate checks this month.

2018 rebates reached $707M

In 2018, insurers across the country paid out nearly $707 million in rebates to nearly 6 million consumers. The figure is based on insurer revenue for the previous three years and was the highest payout since 2012.

Actual figures will not be known until later in the fall, but a Kaiser Family Foundation analysis estimates 2019 rebates will reach $1.4 billion with $800 million going to individual-market enrollees.

Insurers struggled to "right-size" their premiums in the early years of ACA implementation, but profitability grew in 2017-2018 as premiums increased.

Ultimately, the goal of the MLR provision is for insurers to set premiums at a level that will make the rebates unnecessary. The trouble is that insurers set premiums a year in advance and they are not always able to accurately predict the number of plan participants and claim costs.

The analysis predicts more than half of the rebates in 2019 will go to customers from the individual market.

Most large companies self-insure their employees' health coverage and MLR regulations do not apply to self-insured plans. So while the MLR rebates are a useful regulatory tool, only about 2 percent of the population received rebates in 2018.

BCBS of TX's MLR goal

Blue Cross and Blue Shield of Texas had an MLR goal of 80 percent for individual and small-group markets and only reached 77.2 percent, meaning they had to give some customers 2.8 percent rebate checks based on the individual's health-insurance premiums.

For 2018, BCBS of TX brought in a total of about $2.7 billion in health-insurance premiums.

"Blue Cross and Blue Shield of Texas takes seriously our obligation to protect our members and provide them with access to quality, affordable health care. It is always our goal to price our plans accurately and provide maximum value to our customers and members, and we are diligent about paying rebates when the unpredictability of health care costs makes them necessary. More specifically, BCBSTX typically meets, or exceeds the Affordable Care Act's annual medical loss ratio (MLR) standards. Therefore, the level of rebates we provide is limited and a small percentage of our total medical spend," BCBSTX said in a written statement concerning MLR rebates.

Since the MLR regulations of the ACA were enacted seven years ago, customers have received nearly $4 billion in refunds.

MLR rebates were the highest ever in 2018 and they are expected to be even higher in 2019.

Republican's attempted to repeal the MLR provision of the ACA in 2017 through a proposed Better Care Reconciliation Act (BRCA) that would have eliminated the requirement that companies spend most of their premiums on health care. The amendment to H.R.1628 was rejected by the Senate July 26, 2017.

Since the GOP effort failed in 2017 to repeal the ACA, insurers across the country will continue to have to spend a majority of premium dollars on medical costs and quality improvements, rather than administrative costs.

Rebates in 2018 were lower than they had been in 2012, but higher that any year since that time.

Some states don't require rebates

More insurers seem to be right-sizing their premiums with 11 states not having to provide rebates in 2017. However, in 2018 the number of states not required to do MLR rebates dropped to seven.

Most people will not see a rebate check because a majority of insurers do meet or exceed the MLR regulations.

In 2017, the average individual-market MLR was 92.9 percent, average small-group MLR was 86.1 percent (both about the 80 percent requirement) and the average large-group market was 90.3 percent (about the 85 percent requirement). All three groups were the highest compliance level to date.

Insurers' profitability increased, however in 2017-2018 as premiums on the individual market increased sharply, possibly overcorrecting from previous years' unprofitability.

A recent data analysis by The Senior List ranked Texas as 13th in the amount of money people spent on health care annually.

The average Texan spent just over $6,000 on healthcare, about the national average of $5,640.78.

Utilization of health services has not changed significantly since 2013 but the cost of health care has increased by 17 percent across the U.S.

Americans spend about $3.5 trillion on health care each year, about 18 percent of the gross domestic product.