Rhode Island Health Insurer Pays $2M In Refunds

Oct. 04--PROVIDENCE, R.I. -- Neighborhood Health Plan of Rhode Island has mailed out $2 million in refunds to 18,700 policyholders for premiums they paid in 2015.

The rebate checks range from $5 to $595, with the average rebate at about $104, according to Neighborhood Health.

Refunds are mandated by the Affordable Care Act for policyholders whose health plans did not spend at least 80 percent of their premiums in a given calendar year on doctors, hospitals and other health care services or activities to improve healthcare quality. That leaves 20 percent for salaries, bonuses and other administrative expenses.

The 80/20 rule was designed to ensure that most of the money consumers spend on premiums goes to medical care.

Neighborhood said it spent 76.5 percent of its total $55.8 million in premiums in 2015 on health care -- missing the 80 percent target by 3.5 percent, according to a sample of the Sept. 28 letter the insurer sent policyholders. As a result, Neighborhood is required to rebate 3.5 percent of these policyholders' premiums.

Policyholders receiving the refunds are among Neighborhood's newest market: people who do not qualify for Medicaid but who purchased coverage under the Affordable Care Act, known as Obamacare. Neighborhood began selling these policies in 2013 through the state's health exchange, HealthSource RI.

These policyholders comprised about 10 percent of Neighborhood's roughly 180,000 policyholders in 2015.

Neighborhood said the higher-than-necessary premiums charged to these 18,700 policyholders was the result of having limited actuarial data upon which to base their rates for 2015.

Neighborhood set the 2015 premium rates for these policyholders in mid-2014, based on the 700 members who had previously enrolled in the new plans, said Patrick Tigue, director of commercial products for Neighborhood Health Plan of Rhode Island.

"So we had very limited experience," Tigue said. In 2015, enrollments more than doubled to 18,700 and the actual cost of their coverage proved less than Neighborhood had projected.

Neighborhood's $2-million rebate is "pretty sizeable'' based on the refunds nationwide in 2014, the most recent available data, said Cynthia Cox, associate director of health reform and private insurance at Kaiser Family Foundation in Washington, D.C.

Tufts Associated Health Maintenance Organization, Inc. in 2014 refunded nearly $2.2 million for individual policyholders, according to data from the federal Centers for Medicare & Medicaid Services.

One of the largest refunds in 2014 was from one of the biggest California insurers which gave $64 million in rebates.

Neighborhood has received approval for a 9.8-percent rate cut for 2017 that will apply to the same category of customers now receiving the rebates. However, the rebate "did not factor into our decision to file a 2017 (rate) decrease," Tigue said. He said Neighborhood didn't know they would need to refund policyholders until July 2016, after it had filed a request for the rate cut.

Neighborhood policyholders with questions about their rebates can call the insurer's member services at 1-800-459-6019.

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