- Health insurers paid back about $2 billion in excess premium charges to enrollees for 2020, CMS announced, in an indication of the industry's profitability during the COVID-19 pandemic. The rebates for a portion of premium payments are required under the Affordable Care Act if an insurer's spending on patient claims and quality-of-care improvements falls below specified thresholds.
- CMS on Thursday also released a list of insurers owing the medical loss ratio rebates to consumers, with payments disclosed by state and market.
- An estimated 9.8 million consumers are entitled to rebates on 2020 premium payments. Insurers were required to pay any money owed and provide notice of the rebates by Sept. 30.
Insurers registered record profits in 2020, after medical spending and healthcare utilization plummeted in the spring as COVID-19 largely shut down non-urgent care. Even with utilization recovering in the second half of the year, U.S. healthcare spending declined slightly year over year for the first time in recorded history, according to an analysis from the Kaiser Family Foundation.
Insurers paid a smaller percentage of premiums on claims compared to 2019, lowering medical loss ratios and boosting gross margins. KFF predicted earlier this year that individual and group market insurers would pay $2.1 billion in rebates to consumers for 2020 as a result.
In early 2021, the trends reversed for many insurers. Patients returned to the healthcare system for delayed care, pushing utilization rates back up and eroding profitability for many payers. A year after COVID-19 emerged, insurers including Humana, UnitedHealth, Molina, Anthem and Cigna reported rising medical cost ratios and falling profits in the second quarter.
Third-quarter results for Cigna and Molina reflected a surge in medical claims by patients obtaining coverage during the Biden administration's special enrollment period. Humana last month cut its earnings projections for the full year due to expectations that hospitalizations related to the delta variant will push up utilization. Aetna reported higher-than-expected costs for COVID-19 treatment and a rise in its medical loss ratio in the third quarter.
CMS said many insurance companies spend a substantial chunk of consumers' premium dollars on administrative costs and profits, including executive salaries, overhead and marketing.
The ACA requires insurers to spend at least 80% of after-tax premiums on enrollees' medical care in the small group market and 85% for large group plans. If an insurer fails to meet the MLR standard, the company is required to provide a rebate to its customers that year.
Of the 9.8 million consumers expected to receive rebates on 2020 premium payments, CMS estimates 4.8 million are in the individual market and 5 million are employees in the group market. The group market is further broken down in to 2.6 million employees in the small group market and 2.4 million employees in the large group market.
For 2020, health insurers provided a total $1.3 billion in rebates in the individual market, $384 million in the small group market and $291 million in the large group market.
Consumers can get their rebate payments in the form of a premium credit, lump-sum check or lump-sum reimbursement to the account used to pay the premium.