Health Insurers to Pay $1 Billion in Rebates This Year: Report

Private health insurance companies expect to pay $1 billion in rebates to consumers this fall, according to a preliminary estimate by the Kaiser Family Foundation. The rebates are required under a provision of the Affordable Care Act, which mandated that insurers spend at least 80% of premium payments (85% for large group plans) on medical claims or quality improvement rather than having more money go toward administrative costs or profits . Insurers that fail to meet the threshold must provide rebates to their enrollees. The rebates are calculated based on a three-year average.

This year’s rebate total will be larger than in most prior years, the report says, but will be well shy of the record $2.5 billion issued in 2020, when the Covid-19 pandemic curtailed usual spending on elective and routine care, and the $2 billion issued in 2021. This year’s smaller rebate total comes “in part because 2021 was a less profitable year and because the 3-year window no longer includes 2018, when individual market insurers overpriced their ACA marketplace plans due to uncertainty caused by the repeal-and -replace debate and other ACA policies,” KFF said in a news release.

The new analysis estimates that 8.2 million people are owed a rebate, including 4.3 million people who bought plans on the individual market, which includes the ACA marketplaces. The average rebate per person is projected to be $128. Rebates or rebate notices are due to be sent out by the end of September.

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