These profits, interestingly, didn’t last forever.
In 2021, health insurers paid
around $2 billion in rebates back
There’s a term in health insurance called the medical loss ratio (MLR)
. The MLR
is a ratio that describes how much of the revenue in premiums goes to covering medical services. If an insurer’s medical service costs are 80% of the total revenue from premiums, the MLR of the insurer is 80%.
Something that the Affordable Care Act (ACA, aka Obamacare) did was establish a maximum MLR for private health insurers. Health insurance companies have to refund part of the premiums to their members if the MLR does not exceed a certain amount. For smaller plans, the cutoff is 80%, and for large group plans, that cutoff is 85%.
As people started going to seek non-urgent care, and as rebates were owed to members, many insurers like Cigna and UnitedHealth reported falling profits in 2021 relative to 2020.