Difficulty in forecasting insurance premiums

Kaiser Health News reported on insurance premiums, explaining why premiums might not be dropping even though insurance companies may be experiencing greater profits than before the pandemic. While many might have thought that insurance costs would risen this year because of the pandemic, it turns out that many people delayed medical care, so insurers have had to pay out less in medical costs. Based off of that, one might expect that premiums for the next year might fall. The article points out, though, that medical costs could surge next year if people who were delaying medical care choose to be treated then. If health insurance companies price their premiums too high, they can give money back; however, if health insurance companies price their premiums too low, they cannot easily ask for the difference and can only adjust premiums upwards for the following year.

The Affordable Care Act stipulates that insurance companies must spend a certain percentage of their premiums on medical costs. Profits above a certain margin are supposed to be redistributed back to the plan members as a rebate.