Reasons for Health Insurer Premium Relief Include Good PR, Lower MLR Rebates Later

A steady stream of health insurers have announced premium credits and discounts in recent weeks and months after their profits (net income, for not-for-profits) have swelled because of the drop-off in routine healthcare utilization.

In an video interview with Managed Healthcare Executive® this week, Sabrina Corlette, J.D., discussed some of the possible motivations behind the largess.

“Here in Washington, in the halls of Congress, and in state Capitols, I think insurers are well aware that legislators and policymakers know that they have had a very good year,” said Corlette, one of the country’s foremost experts on health insurance and founder and co-director of the Center on Health Insurance Reforms at Georgetown University’s McCourt School of Public Policy.

With policymakers looking for places to find funds, health insurers know “they might have a target on their back,” add Corlette. “I think to the extent that they can generate some good will and some good public relations by offering premium holidays and premium discounts, that is helpful to them.”

Another factor may be their medical-loss ratios (MLRs) — the share of the premium dollar that is supposed to be spent on healthcare. The ACA set the MLR for insurance sold in the individual and small group markets at 80% and for insurance sold to large employers, at 85%. With the decline in healthcare utilization, many insurers are well under their MLRs. If they stay under, they will be required to pay MLR rebates.

Corlette explained that if companies can boost their MLR by getting a bit less in premium revenue, that means less that they will have to pay back later in MLR rebates.

“I think a lot of carriers are thinking, ‘We are going to owe this money back to the policyholders anyway’ and right now people are suffering – people maybe have lost their jobs or lost income.”