Blue Cross to refund premiums to 73,000 policy holders

Blue Cross to refund premiums to 73,000 policy holders

June 1st, 2012 by Dave Flessner in Local - Breaking News

BlueCross BlueShield of Tennessee headquarters sits above downtown Chattanooga.

BlueCross BlueShield of Tennessee headquarters sits above downtown...

Photo by Jenna Walker /Times Free Press.

Tennessee's biggest heath insurer will issue $8.6 million in rebates to about 73,000 individual policy holders in August because the insurer didn't pay a big enough share of the premiums it collected last year to health care providers.

BlueCross BlueShield of Tennessee said it paid 76.6 percent of its premiums from individual health insurance policies to doctors, hospitals and other medical providers last year. The health care reform plan adopted by Congress two years ago requires at least 80 percent of premiums paid by individual policy holders be spent for health care services.

The Chattanooga-based health insurer said it met the minimum requirements of the new act for another 600,000 BlueCross members covered by small or large employer group health insurance plans.

BlueCross officials said they intend to meet the standards of the new health care reform law but acknowledged that setting premium rates in advance of actual experience is not an exact science.

"Even though numerous factors can impact the volume of medical services used by our members, we work to get as close as we can with our projections," Chris Ramsey, director of BlueCross' office of health care reform, said in a statement explaining the refunds. "We are usually within a few percentage points on the projections, as we were with these individual policies."

The health care reform law sets minimum requirements for how much insurance companies are required to spend on health care services and activities to improve health quality. For large employer groups, insurers can't spent more than 15 percent of their premium income on administrative expenses paying claims, broker commissions and fraud prevention as well as money allocated for taxes, profits and company reserves.

Today is the deadline under the new law for health insurance companies to tell the government what share of its premiums were paid to medical providers during 2011. Other health insurers have yet to disclose what, if any, refunds they may be required to make under the new law.

The $8.6 million rebate from BlueCross in Tennessee equals less than 3.4 percent of premiums paid for individual policies and no refunds are planned for those covered by employer or government plans insured or administered by BlueCross in Tennessee.

In the past, BlueCross and other insurers kept excess premiums paid to build up company reserves, fund company operations or boost profits. BlueCross would typically adjust rates in subsequent years if excess profits were achieved in one year, company officials said.

Mary Danielson, communications manager for BlueCross, said the exact amounts to be paid to individual policyholders in August will differ based on the amount of premium each paid last year. She said about 84 percent of subscribers will receive amounts less than $200.