February 22, 2023
The Medical Loss Ratio (MLR) provision established by the Affordable Care Act (ACA) requires health insurers who fail to spend specified percentages of their premium income on medical and quality care improvement expenses to pay rebates to their customers. The goal of this provision is to curb growth in health care premiums while ensuring that plans adequately cover healthcare expenses. In 2019 and 2020, health plans reimbursed customers over $2 billion each year. For 2021, increases in medical spending outpaced premium growth, leading to increased MLRs overall, slashing rebates to approximately $1 billion, benefitting 6.2 million customers, equating to approximately $167 per beneficiary.
Key Details about the MLR
In February 2023, the Department of Health and Human Services (HHS) released the 2021 Medical Loss Ratio (MLR) data which includes MLR rebates due to consumers. Subscribers to Mark Farrah Associates’ Health Coverage Portal™ and the SHCE & MLR Data may access this important data with the benefit of NAIC company codes mapped to HIOS codes used for government reporting by health plans.
In this Healthcare Business Strategy report, MFA summarizes key findings from the HHS report, with a focus on health plan performance as it relates to the Medical Loss Ratio and related rebates due to customers.
MLR premiums and rebate figures were aggregated for all health plans that reported doing business in each state. For 2021, Pennsylvania led the country with nearly $176 million in MLR rebates, a 2% increase from 2020. Virginia’s $147 million in rebates represented a notable percentage of total adjusted premiums at 1.4%, down from 2.35% in 2020. Arkansas showed the largest increase from 2020, with rebates over $21 million, an 189% increase.
Total rebates paid for 2021 were $1.03 billion, down 49% from $2 billion in 2020. The table below shows which states had the greatest overall year-over-year decreases in aggregate MLR rebates paid by health plans. Florida, Texas, Virginia, Tennessee, and Illinois had the greatest overall decreases in aggregate MLR rebates paid by health plans. Overall, 38 of the 50 states experienced decreases in MLR rebates for 2021.
For this analysis, Mark Farrah Associates is reporting all data as filed with CMS in the annual MLR reporting requirements, including Puerto Rico and the Virgin Islands. MFA is not adjusting the data to account for differences in the number of reporting plans between 2020 and 2021.
Market Segment Analysis
MFA assessed the Individual, Small Group and Large Group comprehensive market’s Adjusted Premiums, MLR rebates and Weighted Average MLR for the leading companies. This helps to provide additional competitive insights into how companies are navigating the ACA-regulated health insurance markets. The next three sections will address findings in each segment.
MLR rebates paid in 2021 for the individual comprehensive segment were $486 million which is .5% of the $95.3 billion collected in premiums for this segment. It is important to point out that for payment purposes, health insurance MLR rebates are calculated at the plan and state level. Centene leads all other companies in this segment with $126 million of rebates, or .98% of premium. Carefirst did top the segment leaders with an MLR rebate as a percentage of premium equaling 5.49%. Except for Carefirst, the remaining companies had average MLRs above the ACA-established 80% minimum for the segment. Carefirst’s results in MD & VA contributed to their MLR rebates due.
The above table provides a look at the largest plans in the Individual segment for 2021, based on premiums, independent of MLR rebates paid. Centene led in this segment with almost $13 billion in Adjusted Premiums. Centene’s weighted average MLR of 83.53% was below the average 86.4% for the segment leaders. Bright Health’s 101.41% MLR, up from 97.5% in 2020, was the highest among the leaders in this segment. Elevance Health’s (formerly Anthem) average MLR of 80.78% was the lowest among the segment leaders.
Small Group Comprehensive
MLR rebates for the Small Group segment in 2021 were $362 million, or 0.50% of the $72.3 billion segment. Within this segment, Elevance Health paid the highest volume of 2021 rebates with an aggregate outlay of over $161 million, 2.43% of their adjusted premium. Independence Blue Cross (IBX) ranked second with approximately $64 million in rebates which equated to 4.87% of their segment premiums. Each company’s MLR rebates are calculated at the plan and state level. All had MLRs below the ACA-established 80% segment minimum except for Point32Health and UnitedHealth. However, Point32Health and UnitedHealth had affiliate plans with MLRs at the state level below the 80% standard, which led to the rebates due. Approximately $75 million of Elevance Health’s rebates were incurred in California.
The table above provides a look at the largest plans in the Small Group segment. Healthcare Service Corp. (HCSC) and Kaiser were two of the larger players in this segment that incurred no rebates in 2021. Naturally, they each had average MLRs that were higher than most of their segment leading peers. Kaiser experienced the highest average MLR of almost 95% amongst the segment leaders.
Large Group Comprehensive
MLR rebates for the $245 billion Large Group segment in 2021 were $183 million. Within the segment, Independence Blue Cross (IBX) paid the highest volume of MLR rebates, outlaying over $68 million, or 3.32% of premiums. UnitedHealth’s $29.6 million in rebates ranked second, however, this only equates to .12% of their segment premiums. Once again, the company’s MLR rebates are calculated at the plan and state level. Three of the top five companies required to pay Large Group rebates had average MLRs above the ACA-established 85% segment minimum. However, all had affiliate plans with MLRs at the state level below the 85% standard leading to the rebates due.
The above table provides a look at the largest plans in the Large Group segment for 2021. While this is the largest segment based on premiums, Large Group business generated the lowest amount of MLR rebate dollars in terms of percent of premiums with only 0.07% returned to customers.
Rebates to consumers peaked in 2019 with almost $2.5 billion. Total rebates dropped to just over $2 billion for 2020, and they slid by more than 50% to $1 billion for 2021. This decrease is due to growth in medical expenses outpacing premium increases putting upward pressure on MLRs. For 2021, rebates paid to consumers are a relatively small portion of total premiums. Average rebates paid to Individual segment customers for 2021 are $205 down from $279 for 2020. For the Small Group segment, the average rebate to customers increased from $150 in 2020 to $169 in 2021. Finally, the Large Group segment saw less change with rebates falling to $110 per customer in 2021 from $119 in 2020. It is also important to note that consumers benefitted from over $3 billion in Health Care Quality improvements undertaken by insurance companies in 2021.
SHCE & MLR Data
The data used in this analysis brief was obtained from Mark Farrah Associates' Health Coverage Portal™ as available from the Department of Health and Human Services (HHS). Each year, MFA updates its products with the latest HHS MLR data and information from the National Association of Insurance Commissioners (NAIC) Supplemental Health Care Exhibits (SHCE). Additionally, MFA maintains financial data as well as enrollment and market share for the health insurance industry in the subscription-based Health Coverage Portal™.
About Mark Farrah Associates (MFA)
Mark Farrah Associates (MFA) is a leading data aggregator and publisher providing health plan market data and analysis tools for the healthcare industry. Our product portfolio includes Health Coverage Portal™, County Health Coverage™, Medicare Business Online™, Medicare Benefits Analyzer™, 5500 Employer Health PLUS, and Health Plans USA™. For more information about these products, refer to the informational videos and brochures available under the Our Products section of the website or call 724-338-4100.
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Weighted Average MLR – For analysis purposes, Mark Farrah Associates calculated average MLR weighted on the adjusted premiums for each company by segment. The MLRs used in the calculations are average ratios based upon 2021 data, as reported on line 5.4 and 5.8 of Part 3 of the HHS MLR and Rebate Calculation schedule.
Centers for Medicare & Medicaid Services
“Public Use File for 2021 (as of September 27, 2022)”
“MLR Refunds by State and Market for 2021” (as of September 27, 2022)”