Health insurance companies will pay approximately $1 billion dollars in rebates to members later in 2022. When an insurance company pays out less than 80% of premiums collected in claims or richer benefits within a three-year period, the difference must be returned to policyholders, as per the ACA. Large group policies require that 85% of premiums collected be spent on claims or richer benefits.
Due to the pandemic in 2020 many people skipped care amid doctor office closures and stay at home orders, and this resulted in far fewer medical claims.
Approximately $600,000,000 will be returned to 4 million people with individual policies, and $400,000,000 to 4 million people with small and midsize group coverage.
There were higher loss ratios in 2021 for most health insurance companies, again due to the pandemic, and this will likely lead to higher premiums in 2023. The ACA has done nothing to lower the amount our nation spends on healthcare. The law did however lower the cost of coverage for many through federal subsidies.
The average rebate amount will be $141.00, or approximately $12 a month each health insurance company over-estimated the cost of providing coverage in 2020. Because claims were much higher in 2021 thanks to COVID, it is more than likely premiums will increase in 2023, offsetting the $141 gain in 2022. From an administrative cost point of view, it would likely be much cheaper to simply get rid of the ACA rebate requirement.