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Just how profitable have health insurers been in the last few years?

A recent article in Healthcare Dive examines the latest medical loss ratio (MLR) numbers, revealing a disturbing pattern of rising premiums – and profits.

If you’ve been reading Un-covered for a while, you’re probably well aware that health insurers have been extremely profitable in the last few years. Even so, new information continues to demonstrate just how much money they’re raking in.

If the numbers in a recent article in Healthcare Dive are any indicator, it’s a lot. In 2022, health insurance companies will return approximately $1 billion to consumers and employers through medical loss ratio (MLR) rebates.

This means, essentially, insurers collected – and consumers paid – $1 billion more in premiums than the health plans needed for the relevant time period.

How did this happen?

Per a federal regulation, health insurance companies are required to spend approximately 80 percent of all premium dollars on medical care (as opposed to profits, advertisements, and executive salaries). This is called the medical loss ratio (MLR), and it’s a good thing — it’s supposed to ensure that your premiums go toward your medical claims, and not some CEO’s yacht. If insurers are under that 80 percent threshold, then plans are required to pay consumers back in the form of a rebate.

Over the last few years, consumers got a lot less care due to COVID-19 and social distancing requirements. This means claims went way down – but premiums stayed put. As a result, many insurance companies did not meet the 80 percent threshold, and the rebates have been flowing. As Healthcare Dive puts it, this year’s rebates are just “the latest year in a trend of massive overcharging.”

So how do rebates work?

Most of the rebates – $603 million – will go directly to consumers. According to the Kaiser Family Foundation, individual market enrollees will receive their rebates through check or premium credit, and the rest of the $1 billion will go to those who have insurance through their employer. These rebates will be divided between the employee and employer based on how their insurance plan is structured.

What are insurers going to do from here?

Perhaps try to better align their premiums with their costs to give consumers a break during this crazy period of inflation, and avoid having to pay out another billion next year?


Now that patients are starting to receive more care, claims are eating into that super huge pile of cash and making it just a regularly huge pile of cash. According to Healthcare Dive, “Insurers, who are currently setting 2023 premiums, may get spooked…and potentially propose steeper premiums to lower loss ratios.”

To us, it seems like insurers have figured out another tactic to keep profits safe by spiking premiums to manipulate loss ratios. It’s just another absurdity in our healthcare system: Insurers are able to overprice, knowing they can just pay back rebates down the line if they need to.

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