A Brief Summary of the 2022 Health Insurance Medical Loss Ratio and Rebates Results

 

March 7, 2024

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.  In 2022, rebates to consumers have dropped slightly to $947 million, benefiting 5.8 million customers, equating to approximately $164 per beneficiary.

Key Details about the MLR

• The ACA provision for rebates based on MLR applies to commercial (risk) insurance lines and does not apply to self-funded plans.
• Beginning in 2014, rebate payments are determined by using an average MLR calculation using medical costs and premiums from the past three years.
• For Individual and Small Group segments, insurers must spend 80% of their premium funds on health-related expenses.
• For the Large Group segment, insurers must spend 85% of their premium funds on health-related expenses.

In February 2024, the Department of Health and Human Services (HHS) released the 2022 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. 

State Focus

 

 

MLR premiums and rebate figures were aggregated for all health plans that reported doing business in each state. For 2022, Pennsylvania again led the country with nearly $221 million in MLR rebates, a 26% increase from 2021. Arkansas’ $63 million in rebates represented a notable percentage of total adjusted premiums at 1.58%.  Arkansas’s rebates increased 91% over 2021. Florida showed a large increase from 2021, with rebates of $40.6 million, a 92.9% increase.

 

 

Total rebates paid for 2022 were $ 947 million, down almost 9% from $1.031 billion in 2021. The table below shows which states had the greatest overall year-over-year decreases in aggregate MLR rebates paid by health plans. Virginia, Texas, Maryland, DC, and Maine had the greatest overall decreases in aggregate MLR rebates paid by health plans. Overall, 21 of the 50 states experienced decreases in MLR rebates for 2022.

 

 

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 2021 and 2022. 

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.

Individual Comprehensive

 

 

MLR rebates paid in 2022 for the individual comprehensive segment were $332 million which is .34% of the $97.7 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 $158 million of rebates, or 1.36% of premium. Independence Blue Cross did top the segment leaders with an MLR rebate as a percentage of premium equaling 2.79%.  Except for Independence Blue Cross, the remaining companies had average MLRs above the ACA-established 80% minimum for the segment.

 

 

The above table provides a look at the largest plans in the Individual segment for 2022, based on premiums, independent of MLR rebates paid. Centene led in this segment with almost $12 billion in Adjusted Premiums. Centene’s weighted average MLR of 83.25%, the lowest among the segment leaders, and well below the average 88.6%. Bright Health’s 101.07% MLR, was the highest among the leaders in this segment.

Small Group Comprehensive

 

 

MLR rebates for the Small Group segment in 2022 were $394 million, or 0.57% of the $69 billion segment. Within this segment, Elevance Health again paid the highest volume of 2022 rebates with an aggregate outlay of over $151 million, 2.13% of their adjusted premium. Independence Blue Cross (IBX) ranked second with approximately $85.7 million in rebates which equated to 6.25% of their segment premiums. Each company’s MLR rebates are calculated at the plan and state level. All had MLRs above the ACA-established 80% segment minimum except for Elevance and IBX. Approximately $63 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 2022. Naturally, they each had average MLRs that were higher than most of their segment leading peers. Kaiser experienced the highest average MLR of almost 96.2% amongst the segment leaders.

Large Group Comprehensive

 

 

MLR rebates for the $242 billion Large Group segment in 2022 were $221.7 million. Within the segment, Independence Blue Cross (IBX) paid the highest volume of MLR rebates, outlaying over $71 million, or 3.49% of premiums. UnitedHealth’s $63.3 million in rebates ranked second, however, this only equates to .26% 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.

 

 

The above table provides a look at the largest plans in the Large Group segment for 2022. 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 0.09% returned to customers.

Conclusion

For 2019 and 2020, rebates to consumers peaked totaled approximately $4.5 billion. Since then, as growth in medical expenses have caught up to premiums, rebates slid by more than 50% to $1 billion for 2021 and even further to $947 million for 2022. For 2022, rebates paid to consumers are a relatively small portion of total premiums. Average rebates paid to Individual segment customers for 2022 are $196 down from $205 for 2021. For the Small Group segment, the average rebate to customers increased from $169 in 2021 to $201 in 2022 as the segment has trended more profitable overall for payers. Finally, the Large Group segment saw less change with rebates falling to $104 per customer in 2022 from $110 in 2021. It is also important to note that consumers benefitted from over $2.3 billion in Health Care Quality improvements undertaken by insurance companies in 2022. 

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. Each year, MFA updates its products with the latest MLR data. 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.

Healthcare Business Strategy is a FREE brief that presents analysis of important issues and developments affecting healthcare business today. If you would like to be added to our email distribution list, please submit your email address to the "Subscribe to MFA Briefs" section at the bottom of this page.

Glossary

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 2022 data, as reported on line 5.4 and 5.8 of Part 3 of the HHS MLR and Rebate Calculation schedule.

Sources

Centers for Medicare & Medicaid Services

“Public Use File for 2022 (as of October 12, 2023)”

https://www.cms.gov/CCIIO/Resources/Data-Resources/mlr.html

“MLR Refunds by State and Market for 2022” (as of October 12, 2023)”

https://www.cms.gov/CCIIO/Resources/Data-Resources/mlr.html