Blue Shield Has To Refund Nearly $25 Million

About 240,000 Californians with job-based health coverage may have been surprised by a recent letter from Blue Shield of California saying the company owes them money, not the other way around.

 

Those people work for 30,000 small employers around the state. The refund checks sent by the insurer weren’t sent to the individuals, but to their employers, who had to calculate how to distribute the money to workers based on their share of 2015 premium payments. For some bosses, it was no easy task.

 

“Almost all of (my clients) came to me and said ‘what do I do with this?’” said Adam Rochon with Sequoia Solutions in Exeter, which helps small businesses manage employee benefits.

 

Some employers could keep the refund, if they paid all of their employees’ premiums. For most of Rochon’s clients, money was returned to employees in their paychecks.

 

Employees may have only received enough money to buy lunch, but the total amount refunded was not small change.

 

Blue Shield of California, already under scrutiny from the Department of Managed Health Care, is on the hook for almost $25 million this year to enrollees and the employers that cover them and their dependents. A rule in the Affordable Care Act requires insurance companies to pay customers back when the insurers don’t spend enough money on medical care.

 

Blue Shield is not the only health insurer to issue rebates this year, but its rebates comprise the lion’s share of the money California insurers owed to consumers from premiums they paid in 2015. It’s the second year in a row that Blue Shield has been required to return tens of millions of dollars to its California customers.

 

For the 2014 plan year, Blue Shield of California paid out the largest refund amount of any insurer in the nation to people in the individual and small group markets, returning a total of more than $85 million to California customers for overpaid premiums.

 

A pending lawsuit against the insurer alleges that it shortchanged consumers on the rebates it paid consumers that year. 

 

Blue Shield “might just be trying to maximize how much money they can bring in,” Mendelsohn said, adding that the company could also be having trouble predicting how many premium dollars it will need to cover medical claims.

 

Blue Shield must refund money to consumers because it failed to meet a provision of the federal health law, known as the “medical loss ratio,” that requires insurers covering small businesses and individuals to spend at least 80% of premiums on medical care or other initiatives that improve the quality of care. 

 

Blue Shield spent 77% of the premiums it collected on medical expenses, said Mia Campitelli, a company spokesperson. She said the insurer missed the threshold for medical spending last year because many of its customers moved to new plans in 2015 that complied for the first time with more comprehensive coverage rules under the Affordable Care Act.

 

Insurers were required to send the rebate checks to enrollees’ workplaces by Sept. 30, according to the Department of Managed Health Care. The average amount per member in the Blue Shield policies subject to the refunds was about $58.

 

Blue Shield was not alone in having to pay customers back this year. Six other health insurance companies operating in California missed the mark on medical care spending, but none owed more than a few hundred thousand dollars.

 

 

This story was produced by Kaiser Health News, which publishes California Healthline, a service of

the California Health Care Foundation (www.californiahealthline.org).