Read More

Consumers Can Expect to See Higher than Normal Carrier MLR Rebates For Second Straight Year

Although delayed medical procedures and care aren’t something to celebrate or welcome, there is some good news for consumers who will once again see higher than normal rebates as a result of the Medical Loss Ratio (MLR) provision put into place under the Affordable Care Act.

The regulation requires 80% to 85% of premium revenues go towards consumers’ medical costs.

MLR rebates have been increasing over the last few years due to uncertainty in health care in general but as the pandemic continued, most insurers increased rates in anticipation of higher costs due to the COVID pandemic losses.

This fall, health insurance companies will pay out more than an estimated $2 billion to qualifying employers and individuals according to the most recent CMS data. The rebates, which are calculated based on the share of premium revenues that insurance carriers paid out for health care expenses and quality improvement, are expected to be approximately $350 million dollars lower than last year’s record high of $2.5 billion dollars, but still significantly higher than 2019 where $1.4 billion dollars was issued back to policyholders.

Although the majority of the refund is expected in the individual market, rebates in the small and large group employer market are expected to be in excess of $300 million in each segment. Keep in mind these are still early estimates, with final rebate amount data coming later in the year.

Not all policyholders are due rebates, and carriers determine end recipients by rating structure and pooling practices, but the rough average of return is $127 per member in the small market and $95 per member in the large market when you average it out. By law, insurance companies must begin issuing refund returns later this fall.

Overall rebates could have been even higher if some insurers had not taken the steps to increase their claim costs (relative to premium), including offering ‘premium holidays’ to clients and waiving certain out-of-pocket costs for members, such as costs for telemedicine and treatment for COVID-19.

As the insurance market continues to shift and the environment becomes more competitive and challenging, understanding the benefits landscape and maximizing your benefit investment is critical. If you have any questions, please reach out to your local OneDigital Advisory Team.