Health Insurers To Pay Record Rebates After Individual Market Stabilizes

A new report from the Kaiser Family Foundation shows that insurers are more profitable than ever, and are expected to pay around $800 million in rebates to individual market consumers, a record since the passing of the Affordable Care Act. The insurers did not meet the ACA medical loss ration threshold, which requires 80 percent spending of premium revenues on healthcare claims or quality improvement activities.

Though the early years of the ACA were often volatile and insurers reacted with increased premiums, by 2017 the individual market had stabilized, and premiums were expected to level out as well. But with additional uncertainty surrounding the individual mandate (which was repealed) and the law as a whole, insurers raised premiums 34 percent going into 2018. The analysis showed that premiums fell in 2019 after insurers realized that premiums were too high in 2019.

When previously uninsured individuals were able to purchase insurance when the ACA was passed, what insurance companies paid out in claims took a jump, peaking at 103 percent of premiums in 2016. For the individual market, insurers had raising medical loss ratios, or the amount paid out in claims relative to what was taken in by premiums, but this ratio has been decreasing since 2016. Since 2015, the individual market average gross margin per member went from losing around $9 per month, to making over $166 per month. During the same period, the difference between claims per person and the premiums they paid each month grew to over $150.

Despite worries that the entrance of sicker health plan members would bankrupt insurers in the individual market, it has proven to be stable and profitable for the insurers who have stayed in the market, the study reports. The initial jump in premiums was a market correction because of the added members, but the record rebates are a result of a stabilization of the market combined with unnecessarily increased premiums.

Texas, which did not expand Medicaid and has the highest uninsured rate in the nation, was also impacted by the federal government slashing funding for healthcare navigators by 84 percent since 2016. These navigators help guide those using the individual market to find health insurance that works for them.

Read the report here.