As the industry keeps changing, it's important to know a company's "pedigree."
Blue Cross and Blue Shield of North Carolina will refund $155.8 million to individual policyholders in an agreement with state regulators tied to the federal health reform act.
The state's largest health insurer will provide refunds equivalent to more than 1.5 months of premiums to more than 215,000 holders of Blue Advantage or Blue Options HSA for Individuals policies that were in force as of March 23, 2010, the date the Patient Protection and Affordable Care Act went into effect. The refunds will vary depending on specific premium rates, according to a joint statement from the North Carolina Department of Insurance and BCBSNC. For an average policyholder's monthly premium of about $380, it would be approximately $690. The refunds will be issued by the end of the year.
The refunds stem from new rating and grandfathering rules in the act and will be paid from active life reserves, portions of the premium set aside in the early years of a policy to pay future claims and stabilize rates as an insured's medical expenses rise during the life of a policy. Policies purchased or "substantially modified" after March 23 will end in 2014, when new products will be introduced as the health care act's provisions on state insurance exchanges and other aspects go into effect.
The insurance department also approved rate adjustments to the two health insurance products. It approved BCBSNC's 2.1% rate increase request for the Blue Options HSA for individuals. The department approved a 5.4% hike for Blue Advantage policies; BCBSNC had requested a 7.0% increase
"I'm pleased that the department and Blue Cross were able to identify a way for $155.8 million to go back into consumers' wallets," Insurance Commissioner Wayne Goodwin said in a statement. "I'm also glad that we were able to negotiate a lower-than-requested rate adjustment that will save $14.5 million in future premiums for policyholders."
The agreement was a "collaborative process" between the department and the insurer, BCBSNC spokesman Lew Borman said. "These were funds we didn't need to hold any more," he said.
In August, Blue Cross and Blue Shield of North Carolina announced plans to lay off up to 90 employees in what it called an effort to cut administrative costs in response to the health care reform law. The insurer said it will outsource some claims data entry work and related functions, which will result in the elimination of 80 to 90 jobs over the next nine months. The move will result in annual savings of about $1.6 million to $2.1 million, with most of the job cuts expected to occur between January and May of next year (BestWire, Aug. 16, 2010).
The insurer spends 87% of premium dollars on medical care, while the remainder is spent on customer service, information technology and other administrative expense, Borman said previously (BestWire, July 14, 2010). Under the reform act, health insurers will be required to pay a minimum percentage of premiums back out in actual medical costs -- 85% for large-group plans and 80% for small groups and individual plans.
(By Sean P. Carr, Washington Correspondent: email@example.com)