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Why are insurance companies sending checks?

Male arm in suit flips through pile of insurance forms.
H_Ko / Shutterstock

While insurers collect the same amount in premiums every month, how much they spend will vary based on the claims that are submitted.

To ensure health insurers don’t pocket the extra cash or splurge on marketing, the Affordable Care Act enforces “medical loss ratio” requirements.

For individual, family and small group plans, insurance providers have to spend 80% of their premiums on claims and other activities of value to policyholders. Those activities can include:

  • Health assessments, wellness coaching and other programs to help individuals manage their health conditions.
  • Activities designed to reduce medical errors and improve patient safety.
  • Hospital discharge plans to reduce the need for hospital readmissions.

A maximum of 20% can go to overhead. This is known as the 80/20 rule — though for large group plans with 50 employees or more, the ratio is 85/15.

If insurance providers don’t meet that requirement, they have to issue annual rebates to plan participants in the form of a premium credit or check.

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Many people will get hundreds of dollars

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Pixel-Shot / Shutterstock

Last year, insurers ended up owing a record $2.5 billion in rebates. This year’s toal is expected to be the second-highest: $2.1 billion owed to about 10.7 million Americans, according to estimates by the nonprofit Kaiser Family Foundation.

The rebates are based on a three-year average, and the last few years have seen insurers enjoy hefty profits. Claims were especially low during the pandemic as doctors and hospitals cancelled elective procedures and patients skipped routine care.

While the amount people receive will vary by region and plan, the big money is going to people insured in the individual market. About 5 million consumers will share a total of $1.52 billion, averaging about $300 per person.

In the small group market, the average rebate should be about $125 per person. And in the large group market, $95 per person.

Your state can make a huge difference, too. Look at 2019 — in Kansas, the average eligible policyholder got back $1,359, while Delaware’s average was zero.

A few other factors can affect your payout. If you get your coverage through your employer, your rebate may be split between you and your company. And if the refund is small — $5 for individual plans and $20 for group plans — the insurer isn’t required to pay up since the effort may cost more than the rebate itself.

How to find out if you’re getting a refund

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fizkes / Shutterstock

Carriers are required to pay out these rebates by Sept. 30, which means some consumers may have already received a check in the mail, direct deposit or a credit to their account.

If you haven’t heard from your insurer, you can check whether you qualify for a rebate using the MLR Search Tool from the Centers for Medicare & Medicaid Services.

The tool will let you see whether your provider met the minimum “medical loss ratio” requirements. If they didn’t, you’re due a rebate and you’ll want to get in touch.

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Other ways to cut your monthly bills

Young couple calculating bills at home.
bbernard / Shutterstock

Even if you do have a couple hundred bucks on the way, the average American policyholder spends thousands on health insurance every year. Fortunately, you have a few options to free up significantly more cash.

  • Find a cheaper health insurance policy. The Insurance Information Institute recommends comparing at least three quotes to ensure you’re not overpaying for your coverage. That’s easy enough to do using a quote comparison site — all you’ll have to do is answer a few questions and then review your options.

  • Slash your other insurance bills. The same strategy applies to your other policies. Switching to a different auto insurance company could reduce your premiums by up to $1,000 a year. And you could trim a similar amount from your homeowners insurance bill.

  • Cut the cost of homeownership. If you’re a homeowner and haven't refinanced during the past year of ultra-low interest rates, you could be missing out. You could save hundreds of dollars per month and thousands over time.

  • Dominate your debt. Credit cards have been a life-saver for many Americans during the pandemic, but their high interest can wreck your finances for years. Rolling your balances into a lower-interest debt consolidation loan will help you pay off your debts more quickly and affordably.

  • Get serious about saving. If your budget is stretched to the point of snapping, put a stop to any needless spending. Whenever you shop online, use a free browser add-on that automatically hunts for better prices and coupons so you’re not paying more than you have to.


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There’s no reason not to at least try this free service. Check out BestMoney today, and take a turn in the right direction.

Sigrid Forberg Associate Editor

Sigrid’s is Moneywise.com's associate editor, and she has also worked as a reporter and staff writer on the Moneywise team.


The content provided on Moneywise is information to help users become financially literate. It is neither tax nor legal advice, is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional. We make no representation or warranty of any kind, either express or implied, with respect to the data provided, the timeliness thereof, the results to be obtained by the use thereof or any other matter.