Insurance rates and how they are determined are often more mysterious than a Harry Potter movie. An event bordering on miraculous happens when an insurance company gives you money back for no reason they can really articulate.
Such is the situation with Blue Shield of California applying an 18% credit to Small Group Plans in 
September. While they had made an announcement at the beginning of July about the nature of the credit, they had to send out more clarification on August 3rd. In response to inquiries, the Blue Shield credit is neither a result of their pledge to limit income to 2% of revenue nor is it a fulfillment of the Affordable Care Act Medical Loss Ratio.
To quote from an email, “The credit is voluntary for Blue Shield of California and is as a result of an agreement with the California Department of Insurance for Blue Shield of California Life & Health Insurance Company. ” Well, that certainly adds a little bit of mystery to the muddy water. Something obviously transpired between the California Department of Insurance and Blue Shield. It could have been an honest oversight or just a change in review procedures. Either way, Blue Shield of California Small Groups will get a little bonus going into the fall season. I am sure it will help out buying “back to school supplies” for the kids.
Here is the some of the explanation I read as to the 18% credit and how it will be applied.
FAQ: Small Group Customer Credits on September Bills
July 9, 2012
BACKGROUND:
In collaboration with the California Department of Insurance (CDI) and as part of our ongoing commitment to keeping health coverage affordable, Blue Shield has agreed to provide a one-time credit of 18% on one month’s medical plan coverage to all small group customers with Blue Shield of California Life & Health Insurance Company policies. Additionally, we have decided to apply this credit to small group customers with Blue Shield of California plans, regulated by the Department of Managed Health Care (DMHC). All small group customers will receive the credit on their September bill.
Details of the credit:
- It is a one-time 18% credit off the group’s medical plan rate (life/dental/vision benefits are excluded from the calculation) for September coverage, which will be reflected on their September bill.
- The credit will be calculated as 18% off the client’s September rates, as reflected in our records as of July 31, 2012 (takes into account renewals through September). If the makes changes after that date, their credit will not be adjusted.
- The credit will be based on active membership in the employer’s plans as of July 31, 2012. Terms, new hires, or other changes after 7/31 will not be reflected in the credit calculation.
Clients that cancel on or before September 1 will not receive the credit.
Blue Shield Life small group rates filed for July 1 will not change and are applicable for new and renewing business. Letters will be mailed to employer groups by the first week of August informing them of the credit.
QUESTIONS & ANSWERS:
Does that mean the rates you filed with the CDI were too high?
No, this decision does not mean that our rates were too high.
Our rate filing was reviewed and certified by an independent third party actuarial firm which stated that the increases was “reasonable” under the terms of both the federal health reform and California rate review laws. Also, as part of her report, the independent actuary concluded that our small group rates were expected to produce an MLR of greater than 80 percent for our small group products, in compliance with the requirement of the federal healthcare reform law.
However, Blue Shield understands the deep concern that our customers feel about rising rates. Therefore, in collaboration with the CDI, we agreed to provide this credit for existing Blue Shield Life small group customers.
How much are Blue Shield customers saving as a result of this?
Blue Shield will be crediting approximately $30 million to our small group customers in both Blue Shield Life and Blue Shield of California plans.
Who is receiving the credit – the employer or the employees?
Blue Shield is issuing the credit to the employer customer, who must determine whether and how to distribute it to their employees.
What is my group’s credit amount? How is it calculated?
Your group’s credit amount will be for 18% of their monthly medical plan rate for September coverage, based on Blue Shield’s record of your client’s September plans on file as of July 31. Groups that cancel on or before September 1, 2012 will not receive the credit.
For example, if your client’s monthly medical rate is $2000, then your health plan coverage for September will be $1640 after the credit is applied. (In this example, the amount of the credit is $360, or $2000 x 18%)
When/how will my client receive the credit?
Your client’s credit will appear on their September bill.
What if my client cancels on 8/1 [9/1]? Will they still get the credit?
No, the group must be active with Blue Shield in September in order to receive the credit on their September dues/premiums.
What if my client changes plans before 9/1, will their credit be adjusted to be based on their new dues/premiums amount?
The credit will be based on the September plans and rates that are on file with Blue Shield as of July 31, 2012 when we pull the data for the credits. The credit amount will not be adjusted after that time.
What if I my client’s dues/premium changes after July 31, 2012 because of new employees or terminated employees? Will the credit reflect those changes?
No, the credit will be based on September rates that are on file with Blue Shield as of July 31, 2012 when we pull the data for the credits. The credit will not be adjusted after that time.
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