Health insurers will refund at estimated $2.7 billion to 7.9 million Obamacare consumers this fall to pay back overcharges in recent years, nearly double the 2019 record of $1.3 billion in refunds.
Refunds, or rebates, to people who purchased health coverage through the Affordable Care Act individual marketplaces will average $420 per customer, according to a report released Friday by the Kaiser Family Foundation. More than 4.7 million people in that market are expected to receive the refunds, it said.
The refunds result from the Affordable Care Act’s medical loss ratio provision, which requires insurers to spend at least 80% of their premium income (85% for large group plans) on claims and quality improvements over the previous three years. Insurers that do not meet that requirement must refund the difference as rebates.
The high rebate estimates come as insurers are working on submissions to regulators for proposed premiums for 2021 in the midst of uncertainty about how the coronavirus pandemic will affect health care costs.
But even if they lose money in 2020, insurers could still owe money to consumers in 2021 because the refunds are based on the previous three years, and health insurers made high profits in the ACA markets in 2018 and 2019.
Individual Market Impact
Individual market insurers account for the bulk of the estimated rebates—nearly $2 billion—following highly profitable years in 2018 and 2019 when uncertainties about the marketplaces and repeal of the ACA’s penalty for not having health coverage may have led to excessively high premiums, the KFF said.
The estimates, made by Mark Farrah Associates based on data reported by insurers to state regulators, are preliminary. Final rebate data will be available later this year. Insurers may issue the rebates in the form of a check to consumers or as a credit applied to premiums.
Rebates for premiums charged for small group plans, which cover groups of 100 or fewer employees, are the highest per enrollee at $1,850 per member, but they only cover an expected 189,000 people and total $348 million, the report said.
For people with employer coverage, the rebate may be shared between the employer and employee.
Enrollment Likely to Rise
Meanwhile, enrollment in individual market plans is expected to increase as millions of people lose their jobs and health insurance, the KFF said. The individuals would be eligible to sign up for coverage outside the fall open enrollment period because the loss of job and coverage is a qualifying life event. About 11.4 million people enrolled in ACA exchanges for 2020.
Rebates issued in 2020 will go to subscribers who were enrolled in plans in 2019 that are eligible for the rebates.