Insurers are likely to pay $1.1 billion in Affordable Care Act (ACA) medical loss ratio rebates in 2024, according to a new analysis.
Payers have made a total of $11.8 billion in rebates since 2012, when they became required under the ACA, according to a report from KFF and data compiled by Mark Farrah Associates.
Health plans are required to spend at least 80% of premium income on medical coverage and quality improvements, with the remaining 20% eligible for administrative costs, marketing and profit. The threshold is 85% in large group plans, and, should a plan spend less than those thresholds, it must issue rebates to make up the difference.
Rebates are calculated based on the three previous years, so 2024's rebates are based on data from 2021, 2022 and 2023, according to the report.
The report estimates that about a third ($399.4 million) of the $1.1 billion in rebates will come from plans in the individual market, while $290.1 million in rebates are attributable to the small group market. The remaining $403.3 million is for plans in the large group market, according to the report.
Rebate payouts peaked in 2020 and 2021, when insurers paid out $2.5 billion and $2 billion, respectively. The 2023 rebates were on par with 2024 estimates at $1.1 billion.
Insurers struggled mightily to turn a profit in the early years of the ACA exchanges, but the individual market became far more profitable in the latter part of the 2010s, which is what drove the record high rebates in recent years.
In 2024, the report estimates that medical loss ratios averaged 88% in the large group market and 84% for both the individual market and the small group market.
KFF noted in the report that the analysis is preliminary, and rebate notices are mailed out in September.