The Affordable Care Act (“ACA”) requires health insurance companies to disclose how much they spend on health care and how much they spend on administrative costs, such as salaries and marketing. If an insurance company spends less than 80% (85% in the large group market) of premiums on medical care and efforts to improve the quality of care, they must refund the portion of premiums that exceeded this limit. This rule is commonly known as the 80/20 rule or the Medical Loss Ratio (“MLR”) rule. The Public Use File for 2018 as of October 1, 2019, MLR Refunds by State and Market for 2018, and List of Health Insurers Owing Refunds for 2018 are available at https://www.cms.gov/CCIIO/Resources/Data-Resources/mlr.html.

In an abstract entitled, “How the ACA’s Medical Loss Ratio Rule Protects Consumers and Insurers Against Ongoing Uncertainty” published by The Commonwealth Fund, authors Mark A. Hall and Michael J. McCue state, “The Affordable Care Act’s rule on minimum medical loss ratios (MLRs) protects consumers by capping insurers’ profits and overhead. In the early years of the law, these caps were rarely used because most insurers in the individual health insurance market experienced substantial losses. More recently, however, insurers are earning substantial profits while the individual market is rattled by regulatory uncertainty and change. … The ACA’s MLR rule took effect in 2011. In its first few years, this rule provided important consumer protection by requiring substantial consumer rebates and inducing insurers to reduce their administrative costs, which likely helped to keep premiums somewhat lower. These protections became less visible once insurers adjusted their rates to reflect their lower overhead.  Following substantial rate increases for individual health insurance in 2017 and 2018, however, the ACA’s loss ratio limits have renewed relevance by helping stabilize a market that has been buffeted by cyclical underpricing and overpricing.”

“The MLR provision of the ACA applies to all types of licensed health insurers, including commercial health insurers, Blue Cross and Blue Shield plans and health maintenance organizations.  The provisions apply to all of an insurer’s underwritten business (i.e. when risk is transferred to the insurer in exchange for premium), including plans that were grandfathered under the ACA.  Health insurance provided by an insurer to an association or to members of an association is subject to the MLR provision.

“Self-funded plans (i.e. where the employer or other plan sponsor pays the cost of health benefits from its own assets) are not considered insurers and are therefore not subject to the MLR provision. The MLR standard does not apply even when an insurer administers the self-funded plan on behalf of an employer or other sponsor.” Kaiser Family Foundation, https://www.kff.org/health-reform/fact-sheet/explaining-health-care-reform-medical-loss-ratio-mlr/.

“Rebates vary widely by states and insurers. At the low end, no rebates are owed in seven states. At the high end, insurers in Virginia and Pennsylvania owe rebates of $149 million and nearly $130 million, respectively; Florida ($107 million), Arizona ($99.5 million), and Texas ($91.8 million) follow.” Health Affairs, October 9, 2019.

Rebates exceeding $30 million are:

• Optima Health Plan (VA) owing $98,943,055 in the individual market;
• Health Net of Arizona, Inc. (AZ) owing $92,319,627 in the individual market;
• Health Care Service Corporation, a Mutual Legal Reserve Company (TX) owing $74,946,270 in the individual market;
• Blue Cross of California (CA) owing $61,057,704 in the small group market;
• Ambetter of Peach State Inc. (GA) owing $59,823,400 in the individual market;
• Health Options, Inc. (FL) owing $41,902,508 in the large group market;
• Cigna Health and Life Insurance Company (TN) owing $35,541,534 in the individual market;
• HMO Minnesota (MN) owing $34,127,137 in the individual market;
• HMO of Northeastern Pennsylvania, Inc. (PA) owing $33,858,280 in the individual market;
• Tufts Health Public Plans Inc. (MA) owing $32,823,291 in the individual market; and
• Ambetter of Magnolia, Inc. (MS) owing $31,885,993 in the individual market.