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The 2017 Health Insurance Medical Loss Ratio and Rebates Results: A Brief Summary

 

March 5, 2019

 

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 2015 and 2016, health plans reimbursed customers $406 million and $446 million, respectively.  For 2017, lower MLRs resulting from increased profitability overall, led to $709 million in reimbursements to customers, equating to approximately $119 per benefiting family.

Key Details about the MLR

  • The ACA provision for rebates based upon 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 December 2018, the Department of Health and Human Services (HHS) released the 2017 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 month’s Healthcare Business Strategy, MFA summarizes some 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 consumers. 

State Focus

 States Leading in MLR Rebates

 State   Adjusted Premiums   2017 Total MLR Rebate   Rebate as a % of Premium 
 CA  $72,627,421,675  $97,386,262  0.13% 
 FL  $22,743,349,684  $86,337,961  0.38% 
 MD  $8,331,277,463  $75,904,005  0.91% 
 MI $11,703,982,192  $55,651,722  0.48% 
 MO $6,296,982,659  $45,645,092  0.72% 
 VA $9,939,833,780  $35,342,998  0.36% 
 MA $11,369,750,199  $31,895,756  0.28% 
 PA $14,710,838,482  $30,734,528  0.21% 
 GA $9,486,982,950  $29,479,712  0.31% 
 AZ $4,335,794,229  $27,576,291  0.64% 
Sources: Health Coverage PortalTM, Mark Farrah Associates, aggregate data observations from the HHS | CMS Annual MLR Reporting Requirements

MLR premiums and rebate figures were aggregated for all health plans that reported doing business in each state. For 2017, California led the country with over $97 million in MLR rebates, a significant increase from $17 million in 2016.  While Maryland was not the top state for rebate disbursements, the total amount of Maryland’s rebates represented a high percentage of rebates to total adjusted premiums at 0.91%, up from 0.86% in 2016.  This may indicate that health plans in Maryland spent less on medical and health care quality improvement costs as compared to premiums charged.

Largest Increases in MLR Rebates

 State  2017 Total MLR Rebate  2016 MLR Rebate  YOY Change in Rebate
 CA $97,386,262  $17,296,405  $80,089,857 
 MO $45,645,092  $14,052,364  $31,592,728 
 PA $30,734,528  $1,861,095  $28,873,433 
 AZ $27,576,291  $7,614,255  $19,962,036 
 MN $19,659,849  $0  $19,659,849 
 Total $221,002,022  $40,824,119  $180,177,903 
Sources: Health Coverage PortalTM, Mark Farrah Associates, aggregate data observations from the HHS | CMS Annual MLR Reporting Requirements

As previously mentioned, total rebates paid for 2017 were $709 million, up 59% from $446 million in 2016.  The table above shows which states had the greatest overall year-over-year increases in aggregate MLR rebates paid by health plans.  However, as indicated in the chart below, not all states realized higher rebates for 2017.  Massachusetts, New York, New Hampshire, Ohio, and Indiana had the greatest overall decreases in aggregate MLR rebates paid by health plans.

Largest Decreases in MLR Rebates

 State  2017 Total MLR Rebate  2016 Total MLR Rebate  YOY Change in Rebate
 MA $31,895,756  $40,563,956  ($8,668,200) 
 NY $25,961,536  $31,637,681  ($5,676,146) 
 NH $1,499,908  $6,728,777  ($5,228,869) 
 OH $4,901,107  $8,171,106  ($3,269,999) 
 IN $8,064,209  $11,207,622  ($3,143,413) 
Total $72,322,517  $98,309,143  ($25,986,626) 
Sources: Health Coverage PortalTM, Mark Farrah Associates, aggregate data observations from the HHS | CMS Annual MLR Reporting Requirements

It is important to note that Mark Farrah Associates is reporting all data as filed with CMS in the annual MLR reporting requirements, including Puerto Rico.  We are not adjusting the data to account for differences in the number of reporting plans between 2017 and 2016, nor have we adjusted for missing plans year-over-year.

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

2017 Individual Comprehensive - Largest Segment Rebates

 Company  Weighted Average MLR  Adjusted Premium  MLR Rebate  Rebate as a % of Premium
 CENTENE 83.57%  $5,021,920,844  $37,111,937  0.74% 
 TUFTS 82.85%  $483,436,084  $24,920,312  5.15% 
 ANTHEM 85.74%  $9,050,781,628  $21,764,490  0.24% 
 BCBS OF MN  73.30%  $292,620,800  $19,605,596  6.70% 
 HUMANA 83.05%  $865,736,764  $8,164,205  0.94% 
Sources: Health Coverage PortalTM, Mark Farrah Associates, aggregate data observations from the HHS | CMS Annual MLR Reporting Requirements

2017 MLR rebates paid for the individual comprehensive segment were $132 million which is 0.17% of the $77 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 $37 million of rebates, or 0.74% of premium.  All of the remaining companies had average MLRs above the ACA-established 80% minimum for the segment except for BCBS of MN. However, all of these companies had affiliate plans with MLRs, at the state-level, below the 80% standard, leading to the rebates due.  The majority of Centene’s rebates were incurred in Arizona, Georgia and New Hampshire.  While Tufts’ average MLR is 82.85%, their business in Massachusetts, a state with an 88% minimum MLR, resulted in almost $25 million in rebates; over 5% of adjusted premiums.

2017 Individual Comprehensive - Segment Leaders

 Company  Weighted Average MLR  Adjusted Premium  MLR Rebate  Rebate as a % of Premium
 ANTHEM 85.74%  $9,050,781,628  $21,764,490  0.24% 
 HCSC 88.30%  $5,675,900,232  $0   
 GUIDEWELL MUTUAL 82.64%  $5,498,181,150  $0   
 KAISER 100.19%  $5,024,131,581  $0   
 CENTENE 83.57%  $5,021,920,844  $37,111,937  0.74% 
 MOLINA 88.63%  $3,843,853,222  $4,199,476  0.11% 
 BLUE SHIELD OF CA 85.57%  $3,822,482,780  $0   
 BCBS OF NC 85.70%  $3,700,377,600  $0   
 INDEPENDENCE BLUE CROSS 87.41%  $1,571,094,236  $0   
 CIGNA 87,54%  $1,545,975,381  $6,831,681  0.44% 
Sources: Health Coverage PortalTM, Mark Farrah Associates, aggregate data observations from the HHS | CMS Annual MLR Reporting Requirements

The above table provides a look at the largest plans in the Individual segment for 2017, based on premiums, independent of MLR rebates paid.  Anthem led in this segment with $9.1 billion in Adjusted Premiums.  Anthem’s weighted average MLR of 85.74% was in the middle of pack of segment leaders.  Kaiser’s 100.19% MLR, up from 95.58% in 2016, was the highest among the leaders in this segment.  GuideWell Mutual (Florida Blue) continues to maintain the lowest MLR among the segment leaders. 

Small Group Comprehensive 

2017 Small Group Comprehensive - Largest Segment Rebates

 Company  Weighted Average MLR  Adjusted Premium  MLR Rebate  Rebate as a % of Premium
 ANTHEM 80.32%  $6,563,224,012  $69,987,756  1.07% 
 UNITEDHEALTH 82.49%  $12,564,126,475  $59,400,284  0.47% 
 CAREFIRST 77.82%  $1,522,503,150  $46,986,853  3.09% 
 BCBS OF MI 77.39%  $1,272,783,650  $33,274,722  2.61% 
 AETNA 84.63%  $3,321,307,591  $23,791,359  0.72% 
Sources: Health Coverage PortalTM, Mark Farrah Associates, aggregate data observations from the HHS | CMS Annual MLR Reporting Requirements

2017 MLR rebates for the Small Group segment were $311 million, or 0.44% of the $71.2 billion segment.  Within this segment, Anthem paid the highest volume of 2017 rebates with an aggregate outlay of almost $70.0 million, over 1% of their adjusted premium.  UnitedHealth ranked second with approximately $59 million in rebates which equated to 0.47% of their segment premiums.  Each company’s MLR rebates are calculated at the plan and state level.  All but Carefirst and Blue Cross Blue Shield of Michigan had MLRs above the ACA-established 80% segment minimum.  However, all of them had affiliate plans with MLRs at the state level below the 80% standard which led to the rebates due.  $53 million of Anthem’s rebates were incurred in California.

2017 Small Group Comprehensive - Segment Leaders

 Company  Weighted Average MLR  Adjusted Premium  MLR Rebate  Rebate as a % of Premium
 UNITEDHEALTH 82.49%  $12,564,126,475  $59,400,284  0.47% 
 ANTHEM 80.32%  $6,563,224,012  $69,987,756  1.07% 
 HCSC 86.18%  $6,292,740,524  $0   
 KAISER 93.23%  $4,817,277,590  $0   
 AETNA 84.63%  $3,321,307,591  $23,791,359  0.72% 
 BLUE SHIELD OF CA 79.30%  $2,739,356,672  $19,172,636  0.70% 
 HUMANA 85.56%  $2,472,112,401  $2,045,183  0.08% 
 CAREFIRST 77.82%  $1,522,503,150  $46,986,853  3.09% 
 BCBS OF NJ 81.59%  $1,377,406,489  $0   
 INDEPENDENCE BLUE CROSS 83.06%  $1,362,414,517  $6,794,516  0.50% 
Sources: Health Coverage PortalTM, Mark Farrah Associates, aggregate data observations from the HHS | CMS Annual MLR Reporting Requirements

The table above provides a look at the largest plans in the Small Group segment.  HCSC and Kaiser were two of the larger players in this segment that incurred no rebates in 2017.  Naturally, they each had average MLRs that were higher than their segment leading peers.  CareFirst’s $47 million of rebates were mostly related to its insurance business in the state of Maryland.

Large Group Comprehensive

2017 Large Group Comprehensive - Largest Segment Rebates

 Company  Weighted Average MLR  Adjusted Premium  MLR Rebate  Rebate as a % of Premium
 UNITEDHEALTH 87.22%  $24,436,184,830  $86,812,633  0.36% 
 GUIDEWELL MUTUAL 89.19%  $5,679,552,860  $45,742,652  0.81% 
 CAREFIRST 90.98%  $5,372,703,930  $24,844,572  0.46% 
 AETNA 88.01%  $15,258,267,689  $24,201,008  0.16% 
 NIPPON LIFE 79.90%  $293,408,282  $20,824,474  7.10% 
Sources: Health Coverage PortalTM, Mark Farrah Associates, aggregate data observations from the HHS | CMS Annual MLR Reporting Requirements
 
2017 MLR rebates for the $220.2 billion Large Group segment were $266 million.  Within the segment, UnitedHealth paid the highest volume of MLR rebates, outlaying over $86 million.  Nippon Life’s $20.8 million in rebates ranked fifth, however, this equates to 7.1% of segment premiums.  Once again, the company’s MLR rebates are calculated at the plan and state level.  Four 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.

2017 Large Group Comprehensive - Segment Leaders

 Company  Weighted Average MLR  Adjusted Premium  MLR Rebate  Rebate as a % of Premium
 KAISER 90.51%  $36,037,530,537  $6,924,810  0.02% 
 ANTHEM 90.11%  $25,086,578,224  $14,896,095  0.06% 
 UNITEDHEALTH 87.22%  $24,436,184,830  $86,812,633  0.36% 
 AETNA 88.01%  $15,258,267,689  $24,201,008  0.16% 
 HCSC 92.02%  $13,439,202,740  $0   
 CIGNA 89.89%  $8,169,073,121  $15,218,413  0.19% 
 GUIDEWELL MUTUAL 89.19%  $5,679,552,860  $45,742,652  0.81% 
 CAREFIRST 90.98%  $5,372,703,930  $24,844,572  0.46% 
 BCBS OF MI 87.18%  $4,756,068,900  $0   
 BCBS OF MA 91.24%  $4,364,821,700  $0   
Sources: Health Coverage PortalTM, Mark Farrah Associates, aggregate data observations from the HHS | CMS Annual MLR Reporting Requirements

The above table provides a look at the largest plans in the Large Group segment for 2017.  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 sales with only 0.12% returned to customers.  UnitedHealth and GuideWell lead the segment with nearly $87 million and $46 million of rebates, respectively.

Conclusion

Overall, rebates paid to consumers continue to be a small portion of industry premiums although total rebate dollars increased by 59% over 2016.  With a limited number of exceptions, rebates due to customers were generally not financially material and have had a minimal overall impact on insurance companies.  Likewise, the 2017 average rebate per family of $119 was not a significant factor in reducing consumers’ health insurance costs.  It is important to note that consumers benefitted from $3.5 billion in Health Care Quality improvements undertaken by insurance companies, up from $2.7 billion in 2016, in part due to the ACA MLR provision. 

SCHE & MLR Data

The data used in this analysis brief was obtained from Mark Farrah Associates' Health Coverage PortalTM 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™, 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 monthly 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 2017 data, as reported on line 5.2 of Part 3 of the HHS MLR and Rebate Calculation schedule.

Sources

Centers for Medicare & Medicaid Services
“Public Use File for 2017 (as of December 5, 2018)”
https://www.cms.gov/CCIIO/Resources/Data-Resources/mlr.html
“MLR Refunds by State and Market for 2017” (as of November 15, 2018)”
https://www.cms.gov/CCIIO/Resources/Data-Resources/mlr.html

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