Insurance rebates mailed to nearly half million people

BY THE NUMBERS$1.1 billion - The amount of insurance rebates being distributed to more than 12 million Americans from health insurers that failed to pay a big enough share of their premium dollars to health care providers$28.8 million - Refunds being paid to 240,298 Tennesseans$19.8 million - Refunds being paid to 243,813 Georgians.85 - Percent of insurance premium dollars that must be paid for medical services for large employer groups80 - Percent of insurance premium dollars that must be paid for medical services for individual plans and small employer groupsSources: U.S. Department of Health and Human Services,

As CEO of BlueCross BlueShield of Tennessee, Vicky Gregg heads an insurance giant that collects billions of dollars a year from employers and individuals to pay health care claims for more than 3 million Tennesseans.

But last week, Gregg was among 73,000 BlueCross members who got an unprecedented refund check in the mail from the health insurer, courtesy of the federal health care reform law.

"I buy a BlueCross policy for my son, so I got my check last week like everyone else with individual coverage," Gregg said.

The Chattanooga-based BlueCross, Tennessee's biggest health insurer, mailed out $8.6 million in checks to its individual policy holders in late July because the company failed during 2011 to meet the payment requirements set for insurers in the 2-year-old health care reform law.

Other health insurers in Tennessee are paying out even more. On Wednesday, employers with health insurance plans that didn't pay out at least 80 percent of the premiums to hospitals, doctors and other providers had to begin distributing refund checks to their employees.

Across Tennessee, a total of $28.8 million in refund checks is going to 240,298 insurance subscribers, while Georgia health insurers are rebating $19.8 million to 243,813 Georgians.

The health reform law requires insurers to give out annual rebates by Aug. 1 for any premiums collected in the previous year if less than 80 percent of those premiums were paid to health care providers. For insurers covering large employers, at least 85 percent of premiums paid must go toward health care. he threshold is 85 percent.

Health insurers, in many instances, spent more than 20 percent of the premiums they received on administrative, sales and other processing costs for their own business.

Cigna Healthcare, which operates a major claims processing center in Chattanooga to handle major employer groups, said from 7 percent to 8 percent of its customers will receive a rebate this year.

"Premiums are set based on past claims experience and expected claims for the upcoming year, with a goal of anticipating utilization rates and claims experience as accurately as possible," Cigna spokeswoman Gloria Barone Rosanio said.

But Cigna and other insurers said it often is difficult to predict what health care costs will be in the next year.

BlueCross did not have to make any refunds on its small and large employer groups for last year because the insurer met the requirements of the new law. In 2011, BlueCross paid 80.1 percent of premium collections for health services from its small group plans and 87.7 percent of premiums from large employers groups to health care providers.

But BlueCross and other insurers had more trouble keeping administrative, sales and other expenses down for individual plans, which may not exceed 20 percent of premiums collected. BlueCross said it paid out 76.6 percent of its premiums collected on individual plans to health care providers during 2011.

"When you limit that to 20 percent and you're having to pay the brokers [who sell individual plans] a significant amount to sell that business, it is difficult," Gregg said. "We still came pretty close."

Despite the refund requirement, BlueCross President Bill Gracey said the medical loss requirements of the health care reform law have helped to make consumers more aware of where their health insurance premiums go.

"There are good and bad things about the Affordable Care Act, but one thing it makes clear is how much of the premium dollar goes to medical benefits and that is where most of our money is spent and that is what continues to drive most of the increase in health care costs," he said.