Blue Shield of California will rebate some 2012 premiums.
Health insurance company Blue Shield of California announced that they will be sending rebate checks for certain health insurance plans that didn’t meet the Medical Loss Ratio in 2012. Some large and small employer groups along with individual and family plan members will receive rebates equivalent to .2% up to 3.4% of their 2012 premiums.
Blue Shield misses MLR
The Medical Loss Ratio (MLR), mandated by the Affordable Care Act, specifies that health insurance plans must spend between 80% and 85% of their collected premiums on member health care and improvement. The point of the MLR was to limit excess spending on administration and executive salaries. Blue Shield of California has included the additional restriction of limiting their profits to 2%. Excess profits are also returned to policy holders.
Medical Loss Ratio is working
Even though Blue Shield of California didn’t meet the MLR restrictions, similar to Health Net and Anthem Blue Cross who have rebated 2012 premiums, they have gotten very close or exceeded percentages set down in the ACA. It shows that large insurance companies can manage their internal costs of administration and marketing and still be profitable.
Specific amounts and numbers
Blue Shield of California has released additional information on their rebates in July 19th, email.
Individual and Family Plans regulated by the Department of Insurance: 2% of premium revenue equals $13.3 million that will be returned to 226,034 Individual and Family plan subscribers who were enrolled in the Blue Shield Life plans that did not meet the MLR threshold. The average rebate amount per subscriber is about $59.
Small Business Group Plans regulated by Department of Insurance: 3.4% of dues revenue equals $24.5 million that will be returned to 29,232 Small Business policyholders who were enrolled in the Blue Shield plans that did not meet the MLR threshold. The average rebate amount per Small Business policyholder is about $827.
Large Group Plans regulated by Department of Insurance: 0.2% of premium revenue equals $399,933 that will be returned to 2,685 Large Group policyholders who were enrolled in the Blue Shield Life plans that did not meet the MLR threshold. The average rebate amount per Large Group policyholder is about $149.
Blue Shield of California news release on rebates for 2012
Frequently Asked Questions for
Medical Loss Ratio
June 6, 2013
Frequently Asked Questions for June 1, 2013 MLR Report
What information did Blue Shield report to the Department of Health and Human Services on June 1, 2013? The report sent to the Department of Health and Human Services (HHS) contained the data that Blue Shield used to calculate the medical loss ratio for our health plans and a calculation of whether we met the MLR requirements for our membership segments. The filing stated that certain Blue Shield Large Group, Small Group and Individual and Family plans (IFP) did not meet the MLR thresholds and members on those plans will be receiving a rebate. What does this mean?
Blue Shield did not meet the MLR thresholds for:
• Large group plans (51 or more employees) regulated by the California Department of Insurance (DOI). The MLR threshold for this group is 85%. Blue Shield reported an MLR of 84.8%.
• Small group plans (businesses with 50 or fewer employees) regulated by the California Department of Managed Health Care (DMHC). The MLR threshold for this group is 80%. Blue Shield reported an MLR of 76.6%.
• Individual and Family plans regulated by the California Department of Insurance (DOI). The MLR threshold for this group is 80%. Blue Shield reported an MLR of 78.0%.
Large Group, Small Group and Individual and Family policy holders who are owed a rebate will receive a notification and rebate check by August1, 2013. Why are other employer groups and Individual and Family subscribers not getting a rebate? Blue Shield met or exceeded the MLR thresholds for our other employer group and Individual and Family plans, which means that the members in these plans are receiving the required value for their health care dollars.
How will eligible subscribers and policy holders be notified that they are getting a
rebate?
Blue Shield will send a notification letter and rebate check to the Large and
Small group policy holders (employers) and Individual and Family subscribers
who are eligible to receive a rebate by August 1, 2013.
How will rebates be distributed to Large and Small Group employees?
Eligible Large and Small groups will receive a single MLR rebate check from Blue
Shield. It will be the responsibility of the group to distribute the rebate to their
employees according to the distribution rules established by the Department of
Labor (DOL).
What are some of the ways rebates can be distributed to Large and Small Group
employees?
Examples of ways that Large and Small Group policy holders may distribute part
of all of the refund include:
• Reducing premium for the upcoming year; or
• Providing a cash refund to employees or subscribers that were covered by
the health insurance on which the refund is based.
Note: These are only examples of how employers can distribute MLR rebates.
Employers should consult their own legal counsel or tax professional for guidance.
Is the rebate amount based on how much premium the subscriber paid? Yes.
Does Blue Shield know which specific employers and Individual and Family
subscribers are getting a rebate, and the amount of their rebates?
As of June 1, 2013, Blue Shield can only confirm certain Large and Small Group
employers and Individual and Family plans are eligible for rebates. Rebates and
amounts for specific employer groups and Individual and Family subscribers who
are eligible for a rebate will not be known until mid-July 2013.
What do subscribers and employers need to do to qualify for a rebate from Blue
Shield or to claim a rebate that is owed?
Blue Shield calculates the MLR for each of our market segments based of
requirements provided by the Department of Health and Human Services (HHS).
If a subscriber or employer in a certain market segment is owed a rebate, they
do not need to take any action to claim it. They will be notified by Blue Shield
per the HHS requirements and a rebate check will be sent to them.
Last year employer groups and subscribers who did not get a rebate were informed of their status by letter or through their Evidence of Coverage and Disclosure Form.
Will that process happen again this year? No.
HHS only required that employer groups and subscribers be notified that they would not receive a rebate during the first year of MLR implementation. These notifications will no longer be sent.
Is the rebate considered income/profit for the subscriber and policy holder? Under certain circumstances, the rebates may be taxable to individual and employer groups. They would need to consult a tax professional for more information.
If a subscriber or employer cancelled mid year (2012), are they still eligible for a rebate if their plan qualified? Yes. A subscriber or employer only needs to be active at any point in time during 2012 to receive a rebate in 2013.
If an Individual plan member or employer group made a plan change during the MLR plan year which resulted in them being on a plan that did not meet the MLR for a portion of the year, how will their rebate be affected? The Individual or employer group will receive a pro-rated rebate for the amount of time they were on the plan that did not meet the MLR. Blue Shield of California recently increased premium rates for certain market segments this year, however Blue Shield is now required to pay premium rebates.
Are these events related? No. They are not related. Health plan premiums are based on estimated future costs of healthcare while the MLR is based on the previous year’s actual results.
Estimated future costs and actual expenses differ in every industry, especially healthcare. Insurers will raise premiums when they anticipate an increase in medical costs and/or utilization in the upcoming year. Paying a rebate in one year does not mean an insurer has sufficient resources to cover expected costs throughout the following year.
How does Blue Shield’s 2% pledge relate to MLR? Blue Shield’s pledge to limit profits to 2% and return the excess profits to consumers is not related to MLR. MLR is a federal health reform mandate, while the 2% pledge is an internal program initiated by Blue Shield.
What is the Medical Loss Ratio mandate? Under the Affordable Care Act, health carriers are required to spend a minimum percentage of premium revenue on medical expenses. The percentage of premium spent on medical expenses is called the Medical Loss Ratio (MLR).
What are the health reform requirements for Medical Loss Ratio? For individuals and small group health plans – carriers must spend no less than 80% of premium revenue on medical expenses. For large groups – carriers must spend no less than 85% of premium revenue on medical expenses.
Which plans and lines of business are subject to MLR? The MLR reporting and rebate requirements apply to all comprehensive health coverage, group and individual (IFP), underwritten by Blue Shield—including grandfathered plans.
Does MLR apply to self-funded (ASO) groups? The MLR requirements of health reform do not apply to self-funded (ASO or ASC) business.
Does MLR apply to Medicare Supplemental (Med Supp) plans? The MLR requirements of health reform do not apply to Medicare Supplemental plans.
What if Blue Shield does not meet the MLR thresholds? If carriers do not meet the required MLR for a calendar year, they will be required to pay rebates to employers and individuals by August 1stof the year following the calendar year to comply with a federally mandated deadline.
What are MLR calculations and rebate determinations based upon? MLR calculations and rebate determinations are based on market segment. All plans are grouped by market (Individual market, Small Group market, and Large Group market), and rebates are paid to all plans in the market if the minimum loss ratio is not met.
Are Individual and Family Guarantee Issue (GI) plans included in the rebate distribution? Yes.
How is MLR calculated? The basic calculation for determining MLR is to divide the medical expenses of the plan by the earned premiums. This will determine the percentage of revenue spent on claims costs.
• Medical expenses are payments for clinical services (incurred claims) and expenditures for activities to improve healthcare quality.
• Earned premiums is revenue generated from plan premiums, minus state and federal taxes, licensing fees, and regulatory fees.
How are MLR rebates determined? If a plan expends more than the allowed amount on administrative expenses as compared to medical claims, a rebate will be required. All rebates must be distributed by August 1st, 2013.
• Large Group
If less than 85% is spent on medical expenses, the difference must be returned to the employer group.
• Small Group and IFP
If less than 80% is spent on medical expenses, the difference must be returned to the employer group. If rebates are due to IFP subscribers, the subscriber will receive a rebate check.
REBATE EXAMPLE:
If the MLR for a Large Group segment (51 or more employees receiving a W2 from the employer) is 75%, then10% of the premium (the difference of 85% MLR threshold minus the actual MLR of 75%) must be paid back to the employer group by August 1st, 2013.
Will Blue Shield need to amend employer group contracts with rebate distribution rules? No.
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