Under the Affordable Care Act, healthcare insurance companies must refund premium income if it exceeds certain levels. The Medical Loss Ratio provision of the act states insurers can only keep a certain percentage of money to go toward administration, marketing, and profits. This year, insurers will issue roughly $2.1 billion in refunds.
The refund represents the second-largest amount since the ACA was introduced in 2012. In 2020, insurers issued $2.5 billion in rebates. However, 2021 rebates are more than 50% higher than the pre-2020 record of $1.4 billion, issued in 2019, according to research compiled by Mark Farrah Associates and reported by KFF.org.
Expected rebate amounts vary based on the market, with individual markets refunding the highest amount of $1.5 billion, small group market insurers refunding $308 million, and large group market insurers giving back $310 million. Since some insurers have not yet filed their final rebate data, the 2021 number could be even higher.
Based on the Mark Farrah Associates data, more than 10,766,000 members could receive a rebate, with an average of $198 per member refunded.
Telehealth Reduces Insurance Costs
KFF.org reported that the larger-than-typical rebates for the past two years are likely driven by “suppressed health care utilization” during the pandemic. Elective surgeries were postponed by hospitals to concern space and resources, while many people postponed routine doctor’s visits and preventative care to practice social distancing. Although telehealth claims increased, this more affordable method of practicing medicine and did not offset the lost costs. Even the expenses of COVID-19 testing and treatments did not make up for the decreased spending in 2020 and 2021.
Some insurance companies offered “premium holidays,” or waived patient costs to reduce their profits, which helped reduce 2020 refunds or that number would have been even higher than the reported $2.5 billion.
In 2021, although the total refund amount is exceptionally high, most of those refunds are being issued by individual insurance providers. Refunds in the large and small group market remain relatively stable compared to 2018 and 2019 refunds.
How Can You Collect Your Refund?
If you get your health insurance through the ACA marketplace, you could have an unexpected windfall coming your way. If you write your health insurance policy through the individual market, your insurance company could provide a premium credit or issue a check payment.
If your employer writes your insurance through a group policy, your employer will receive the payment and may share the refund with employees, depending on the plan’s contract and how the policyholder and participants share premium costs, KFF.org reports.
Refunds under $5 for individuals and $20 for group coverage, however, do not need to be refunded under the law because the administrative costs could exceed the refund amount.