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File photo shows part of the HealthCare.gov website. (AP Photo/Jon Elswick)

This story was updated at 3:30 p.m. on Thursday, May 6, 2021, to correct various years and information about medical loss ratios.

For the second time in the past eight months, Tennessee's biggest health insurer is mailing rebate checks to individuals who purchased their health insurance through the health exchange market over the past three years.

BlueCross BlueShield of Tennessee is sending refunds this month averaging $250 each to about 100,000 Tennesseans who bought individual coverage under the Affordable Care Act health exchange market in 2018. The rebates stem from the extra $214 million given to BlueCross in Tennessee after the Supreme Court ruled last year that insurers were not being adequately compensated by the federal government for the risk factors under the so-called Obamacare program during its first three years.

Under the so-called Obamacare program, health insurers must refund premium income paid by both the government and subscribers if administrative costs and profits exceed 20% of the premiums paid. Last September, BlueCross issued refunds averaging $890 for participants in the individual health exchange markets in 2019.

The Chattanooga-based BlueCross and BlueShield is the biggest provider of so-called Obamacare plans in Tennessee, but the insurer did not provide its plans in 2018 in the state's biggest markets in Nashville or Memphis.

BlueCross initially lost money on the health exchange market when it began in 2014 and the Chattanooga-based insurer subsequently doubled its rates over the next two years and withdrew from the state's two biggest cities to make up for the shortfall.

BlueCross said its early losses were due, in part, on government limits on what it was paid. The Supreme Court ultimately ruled in April 2020 that insurers like BlueCross were due higher "risk corridor" payments from the Centers for Medicare and Medicaid Services, which administers the Obamacare program.

The extra payments to BlueCross made up for some of the losses in 2014 and 2015 and provided extra income in 2016. The medical loss ratios are based upon the previous three years of results so the extra income in 2016 resulted in the rebates for 2018 participants, according to the Tennessee Department of Commerce and Insurance

Originally, BlueCross spent 77.9% of premiums on health care programs and medical claims for the 2018 reporting period, missing the 80% medical loss ratio target for individual policyholders by 2.1%. After incorporating the risk corridor funds, the updated 2018 loss ratio fell to 5.3%, which is 4.7% shy of the spending target.

"This rebate system continues to work as intended," Tennessee Insurance Commissioner Carter Lawrence said in an announcement of the rebate checks going out.

Insurance carrier Cigna previously issued similar rebate checks in January to its individual policyholders in the health exchange market plans it administered in 2018. Cigna issued rebates averaging about $55 to more than 67,000 of its customers who were enrolled in Cigna plans under the health exchange in Tennessee.

BlueCross spokeswoman Dalya Qualls said the company "is in the process of distributing checks now, and they will all be mailed no later than May 25" and include a letter from BlueCross that explains the rebate. The average refund is$ 250, but some checks may only be as little as $5, depending upon how long and who was covered by the individual plan.

The rebate does not cover premiums for other coverage such as dental or vision and the biggest share of BlueCross members who are covered through group health plans with their employers or through a Medicare Advantage plan will not receive these rebates.

Qualls said BlueCross sets rates each year based on anticipated costs for members' medical care, along with a provision for the costs of administering the coverage and assuming the risks of such coverage. The Affordable Care Act (ACA) requires that health insurers providing coverage to individual and small group members spend at least 80 percent of collected premiums on health care programs and medical claims. This percentage, or medical loss ratio, is based on a three-year rolling average. If the company misses the spending target, it issues rebates to policyholders.

"We continue to center our efforts around supporting the health of those we serve by advocating for affordable, high quality medical care and using our members' premiums responsibly," said Kelly Paulk, vice president of product strategy and individual markets for BlueCross. "The majority of the premiums we collect are used to pay providers for medical and behavioral health care and prescription drugs, and for support services that enhance our members' health care experience."

As the rebate checks begin arriving, Lawrence urged Tennesseans to be cautious if they are approached about their refund by someone they do not know and to be wary of scam artists who may want to perpetrate a scam at the expense of consumers who may be receiving a rebate check. To help protect consumers, Lawrence offered these consumer tips:

* The rebate checks are valid and should be deposited by the policyholder. Do not believe anyone who might say otherwise.

* Do not give your check or any of your personal or financial information to someone who contacts you and whom you do not know.

* If someone tries to steal your rebate check or claim it as their own, report it to your local police or law enforcement agency immediately.

Contact Dave Flessner at dflessner@timesfreepress.com or at 423-757-6340.

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