MLR and COVID

The Affordable Care Act requires insurers to spend 80% of qualified premiums on a combination of claims and quality improvement projects. If, over a rolling three year window, an insurer does not do that, the insurer has to send checks out to enrollees to make up the difference. The Kaiser Family Foundation tracks and estimates future MLR rebates every year. The 2021-2022-2023 estimates are up and it is a nothingburger:

We expect some level of rebates if we think that insurers target a regulatory MLR a smidge above 80%. I say a smidge because the administrative costs of sending out checks is fairly high. But with a target, there are misses. Some misses are high. Some misses are low. If there are consistently low misses, then the MLR rebates are sent out.

We saw from 2019 to 2021 that there were large individual market MLR rebates due to Silverloading — insurers jacked up premiums but enrollment stayed mostly constant and risk stayed fairly flat.  There were concerns in 2020 that COVID would crush claims as everyone avoided anything that was vaguely avoidable.   By now, we’re not seeing any of that showing up in the data.  From this point of view, we’re back to normal statistical noise.