Tens of thousands of New Jerseyans with individual health insurance plans have received rebates from 2019, for a collective $48.2 million.

Horizon Blue Cross Blue Shield of New Jersey this month sent out rebates of $367, on average, to about 131,520 members, according to the company, since less than 80% of premium dollars for that year went to pay for medical claims.

Medical loss ratio is what the insurance industry calls the amount of money collected from insurance premiums that goes to pay for claims.

MLR rebates are required under both state and federal law in New Jersey, when an insurer’s spending on medical costs fall below certain levels, once all claims are processed in a given year, according to New Jersey Health Care Quality Institute President and CEO Linda Schwimmer.

“When they shoot under that, in terms of spending, that means that they overpriced the product — in retrospect — and they could have been even more competitive and more affordable,” Schwimmer said, adding "both the plans and definitely the customers would prefer for premiums to be lower to begin with."

The insurer also sent rebates, roughly $1,000 each, to the 26,577 employers that provided coverage through Horizon small group plans in 2019, for another $27 million or so.

Health insurance rates for 2020 were formed in 2019, when the impact of COVID-19 was not yet a reality in the U.S.

The pandemic then caused low utilization of health insurance claims, as patients put off preventative care and other non-emergency visits, so Schwimmer expects that there will be a big rebate for policyholders next year, too.

However, health insurance rates went up in 2021, after being set last year, as insurers predicted pent-up demand in the months ahead for that delayed medical care.

Horizon has attributed its rebates for 2019 as a sign that their approach to the individual insurance plan market has been successful.

“Each year, Horizon sets premiums for the upcoming year based on actuarial estimates of what the company expects to pay in claims for that year. Horizon works continuously with doctors, hospitals and pharmacies to ensure our members get the care they need to achieve their best health and make healthcare more affordable. This has additionally been made possible by the success of our OMNIA Product where we currently have over 90% of our Individual membership," Michael Considine, Vice President of Consumer, Small Group & Mid-Size Markets for Horizon BCBSNJ, said in a written statement.

Amid an "unpredictable and uncertain time when it comes to healthcare costs," Schwimmer said the more people that are buying insurance, whether they think they will need it or not, makes the overall healthcare pool healthier.

That's because the risk is spread among more people, which lowers overall premiums, which in turn enables more people to afford insurance, creating "a virtuous cycle."

When people only buy insurance when they know they will need health care, the opposite happens, she said, as “adverse selection” creates a premium “death spiral” in the market.

If only those who need insurance purchase it, then premium rates go up and eventually, Schwimmer said, no one can afford insurance.

"Right now, we don't know when we're going to need insurance, particularly in the middle of a pandemic, so it's really important to maintain an affordable market," she continued, "and to give people as many financial subsidies and support as well as time to shop and education about the different options."

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