Health Insurance Premium Refunds Under the Affordable Care Act

 One of the consumer-friendly provisions of the Patience Protection and Affordable Care Act (ACA) provides refunds to the individual participants in the health insurance exchanges whose insurer spent less than 80% of all collected premiums providing actual benefits to participants. In 2021, some of the insurance companies who participated in the exchanges, were required to refund over one billion dollars to the enrollees in the insurance exchange plans. Over six hundred million was distributed to those enrolled in individual plans and the remainder to small employer plans in 2022. The average refund, which was provided via check or digital deposit was $141. I personally received a refund and this is the second time I have received a refund from my ACA plan. For the 2021 plan year over eight million participants received refunds. Since inception, the Affordable Care Act has paid out nearly twenty billion dollars in premium refunds to individuals and small group plans (SHOP) because of this provision. The rule uses a three-year loss ratio average to determine if an insurer overcharged insurance exchange participants. This provision protects the insurance companies from shock loss years and allows a smoothing of participant claim utilization over time. Without the government mandate insurance companies would pocket the extra premiums as reserves, if they are nonprofits or profits. Insurance companies can always elect to lower rates or charges to their customers, but this is rare, especially for individual health insurance. It is also important to note that only a few insurers each year are required to refund excess premiums, most meet the 80%-of-premiums-must-be-spent-paying-benefits-to-the insured rule.

 Money Refunded to Insurance Exchange Participants since 2012 (Norris, 2022)

2021-$2,100,000,000

2020-$2,460,000,000

2019-$1,370.000.000

2018-$   707,000,000

2017-$   447.000,000

2016-$   397,000,000

2015-$   469.000,000

2014-$   332,000,000

2013-$   504,000,000

2012-$1,100,000,000

 The Kaiser Family Foundation found that prior to the Affordable Care Act mandate of spending at least 85% of insurance premiums to provide benefits for the health exchange SHOP group plans and 80% for individual plans, most group plans met the threshold but only half of the individually insured plans did. This meant that people buying individual medical insurance overpaid for what they received and the insurer kept the profits. (Cynthia Cox, 2013)

 Of course, the insurance industry was not happy to have to reveal profitability to a government agency and worse yet, refund overcharged premiums to their customers. Due to pressure from the insurance industry many states were granted waivers from this minimum loss ratio rule, with the argument it would force insurance companies out of their marketplaces. This has not been the case and both insurance companies for which I received premium refunds since 2012 are still in business in Washington State, a semi-rural state. Insurance companies are very conservative when calculating their premium charges for their contracts, based on actuarial science. The data for predictive health impacts has only grown stronger and the behemoth insurance industry has more tools at its disposal to maximize profitability.

 During the pandemic, the Biden Administration provided additional financial subsidies to help people obtain healthcare insurance through the insurance exchanges through the American Rescue Plan.

 Clearly, millions of Americans have benefited by the government mandates in the insurance exchanges, which use an ingenious method of advancing tax credits to make medical insurance more affordable to individuals, families, and small businesses. It is always good to be reminded of the benefits we receive from our government, especially during an election year. 

 And this is the healthpolicymaven signing off encouraging you not to sign blanket releases when submitting to inpatient medical procedures, do stipulate that for which you agree and decline.

 Roberta Winter is a freelance journalist and health policy analyst. She accepts no payment from any sector of the US healthcare system. Her guidebook to the US healthcare system was published by Roman & Littlefield in 2013. https://www.amazon.com/Unraveling-U-S-Health-Care-Personal/dp/1442222972

  

References

Cynthia Cox, G. C. (2013). Beyond Rebates: How Much Are Consumers Saving from the ACA’s Medical Loss Ratio Provision? Kaiser Family Foundation. Retrieved November 13, 2022, from https://www.kff.org/health-reform/perspective/beyond-rebates-how-much-are-consumers-saving-from-the-acas-medical-loss-ratio-provision/

Norris, L. (2022). Billions in ACA rebates show 80/20 Rule’s impact. Health insurance.org. Retrieved November 16, 2022, from https://www.healthinsurance.org/obamacare/billions-in-aca-rebates-show-80-20-rules-impact/