Expect big MLR checks in the fall of 2019

Many individual market buyers in several states should expect to see surprising checks in the fall of 2019. These will be Medical Loss Ratio (MLR) rebate checks. Insurers are required to spend, on a three year rolling average, 80% of the premium dollars on claims and quality improvement expenses. If they spend more than that, that is fine. If they spend less than 80%, the insurers need to cut checks to their policy holders.

Over the past couple of years, there have not been large checks cut as insurers weren’t making large profits anywhere in the individual market. That is changing. 2017 looks to have been a very profitable year for insurers. 2018 looks to be even more profitable. There is a good chance that the 2016-2017-2018 time period will produce several states with an average MLR well below 80% as the first quarter results plus initial 2019 rate filings strongly suggest that insurers in many states overpriced their premiums for 2018.

The Kaiser Family Foundation has a raw MLR table. Raw MLR is Claims/net premiums. It is not the MLR that CMS uses to calculate rebates. The CMS MLR tends to be a point or two higher in general than a raw MLR.

I think the states that have a 2016-2017 raw MLR average of under 85% where 2016 raw MLR is greater than 2017 raw MLR have a good chance of seeing significant rebate checks in 2019. Three states qualify:

  • North Carolina
  • Alaska
  • Missouri

These three states had low levels of 2018 insurer competition (Alaska 1 insurer for the entire state, Missouri and North Carolina 1 insurer for most of the state).

Another seven states have a raw 2016-2017 average MLR of less than 85%.  I think Arizona and Oklahoma are the states that are most likely to see big pay-outs as the no pay-out 2018 MLR target is greater than the 2017 MLR.  Again, these states are low competition states.  Oklahoma had a single insurer for the entire state and Arizona’s counties were all single insurer.

Eyeballing the data it seems that MLR rebates are likely to occur in low competition states rather than high competition states but I don’t have firm proof on that yet.

I will be curious as to how the politics of significant MLR rebates play out as they pay out. I had a cynical moment last October when I thought about this for the first time in the context of CSR payments:

in the fall of 2019, rebate checks start showing up just as final rates are to be approved. If there is still CSR uncertainty, rate regulators will have strong incentives of getting great press on being tough on the insurance companies by forcing them to hand out very large checks to tens of thousands of residents….

And then in the fall of 2020, ambitious state insurance commissioners will be handing out rebate checks in late September as they are running for Governor or the Senate. Or if they are a bit less ambitious, they are supporting the incumbent party by handing out checks and injecting new federal money into the state and making the fundamental background economic picture a bit better than it otherwise would have been.

I might be getting too cynical today.


Is that how things will play out?

16 replies
  1. 1
    The Ancient Randonneur says:

    We’re going to see a replay of elected GOP officials trying to take credit for something they worked diligently to kill off. Reminds me of Republican Congresspersons back in 2007-2010 showing up for ribbon cuttings for projects they voted against.

  2. 2
    RobertDSC-iPhone 6 says:

    How can Benedict Donald interfere and sabotage the process?

  3. 3
    Mary G says:

    The Republicans will probably pass a law to let the poor abused and misunderstood insurance companies keep the money.

  4. 4
    Alain the site fixer says:

    Cleared out the disk and opcode caches. Should make the site a bit zippier. I’ll try to keep an eye on things later today in case the site bogs down again. Your patience is appreciated.

  5. 5
    Alain the site fixer says:

    @Alain the site fixer: Also, I freed a few comments.

  6. 6
    Ruckus says:

    David, isn’t competition one of the best ways to control pricing? A low competition state will have higher prices than they need, if for no other reason than they don’t have to sell against others. And even a good insurance board probably won’t mess with their rates too bad, because they have nothing else to fall back on. So a low competition state is going to charge more and have more to refund. That’s not only the insurance business, that’s business of any kind. With my businesses I always had to worry about both what I could do to compete service/product wise but price as well.

  7. 7
    sheila in nc says:

    David, when you say “required to spend…80%”, is that requirement from the ACA? I seem to remember it that way but want to be sure — 2009 seems like such a long time ago now.

  8. 8
    rikyrah says:

    Thanks Mayhew for the info.

  9. 9
    Steeplejack says:

    Save my nym!

  10. 10
    Steeplejack says:


    ETA: Well, it did save it, at least in this thread. But it doesn’t seem to carry over to other (new) threads. And I’m also getting—for the first time—that problem other people experienced of not being able to see their just-posted comment unless they do an “I really mean it” Ctrl-F5 page/​cache refresh.

    ETFA: And now FYWP won’t let me edit my comment. Wah!

  11. 11
    Yarrow says:

    @Steeplejack: For me it seems like my nym carries over if I have recently posted in another thread. If it’s been over a certain amount of time–it seems to be about 30 minutes–then all saved nyms disappear, from previously commented-in threads and new threads.

    Sorry to hijack David’s thread!

    David, I’m having a hard time wrapping my head around the idea that people are going to get rebate checks from health insurance companies. It’s going to be weird when some people get them and other people don’t.

  12. 12
    Ben Cisco says:

    Can one of the front pagers please go to the Friday Morning Open Thread and delete comment 33 please?

  13. 13
    David Anderson says:

    @sheila in nc: yes ACA requirements

  14. 14
    Zinsky says:

    Expect Trump to kill them before the checks are cut. He will use the money toward his fatuous Wall.

  15. 15
    cckids says:


    Expect Trump to kill them before the checks are cut. He will use the money toward his fatuous Wall.

    Oh, I don’t know. Think of the lowest, most hypocritical, false, lying spin Trump could put on those checks. He will think of and do something worse.

  16. 16
    retr2327 says:

    @cckids: Exactly. He’ll claim credit for scaring the insurance companies into issuing the rebates.

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