Health insurers owe South Carolina customers above-average refunds

July 24--Thousands of South Carolinians may soon see checks in their mailboxes because health insurance companies spent too much money on "profits and red tape" last year, according to federal data released Thursday.

The Affordable Care Act requires insurers to spend at least 80 percent of premium dollars on "patient care and quality improvement activities." Because the companies spent too little in those areas, the "Medical Loss Ratio" rule mandates that they return some money to South Carolina customers.

The federal government reports 205,229 consumers insured in the individual and small group markets in South Carolina will benefit from about $13 million in refunds, or an average $92 per family. Residents insured through large groups will not receive refunds in this state. About 4 million residents in South Carolina are covered by some type of health insurance, according to U.S. Census data. The refunds apply to 2013 health insurance policies.

This is the third year the Medical Loss Ratio rule has been enforced, said S.C. Department of Insurance Director Ray Farmer. In 2011, insurance companies were required to refund $19.6 million to South Carolina customers. In 2012, total refunds dropped to $6.2 million. Although companies must return about $13 million to residents statewide this year, it does not mean insurers aren't complying with the rule, he said.

"It's difficult to gauge how much the 80 percent . will be for a given year," Farmer said. "Rates are set on a prospective basis, so they're never going to be right on the mark."

Customers in South Carolina will receive more back from insurance companies than both the national average and refunds expected in neighboring states.

In Georgia and Tennessee, residents will receive an average $53 refund. In North Carolina, the average is $77. Nearly 7 million people across the country will receive an average $80 refund.

Patti Embry-Tautenhan, a spokeswoman for BlueCross BlueShield of South Carolina, said the company intends to mail out the refunds it owes soon.

BlueCross BlueShield, the largest private insurance company in the state, owes customers more than any other insurer in South Carolina -- about $5.5 million for customers in the individual market and nearly $1 million for customers in the small group market.

"Our rebates vary among customers. Each year we estimate the coming year's future medical costs while rebates are based on past claims for actual medical costs," Embry-Tautenhan said. "Aside from the complex calculations and data collection, the challenge is really one of perception in that it potentially creates a false impression of overpricing."

Companies that owe refunds must either send a check via mail, reimburse the customers directly to the accounts used to pay the premiums, reduce future premiums or improve future health coverage.

"The 80/20 rule is bringing transparency and competition to the insurance market, ensuring that consumers are continuing to receive value for their premium dollars," said U.S. Health and Human Services Secretary Sylvia Burwell, in a prepared statement accompanying the data release.

Reach Lauren Sausser at 937-5598.

Medical insurance rebates

The following insurance companies owe South Carolina customers refunds under the Affordable Care Act's Medical Loss Ratio rule:

BlueChoice HealthPlan of South Carolina

Individual market: $982,641

Small group market: $308,558

BlueCross and BlueShield of South Carolina

Individual market: $5,481,361

Small group market: $986,896

Coventry Health Care of the Carolinas

Individual market: $689,848

Small group market: $1,473,775

Freedom Life Insurance Company of America

Individual market: $82,321

Small group market: $0

Golden Rule Insurance Company

Individual market: $2,692,516

Small group market: $0

John Alden Life Insurance Company

Individual market: $31,675

Small group market: $6,742

Mid-West National Life Insurance Company of Tennessee

Individual market: $144,056

Small group market: $0

National Foundation Life Insurance Company

Individual market: $135,634

Small group market: $0

Standard Security Life Insurance Company of New York

Individual market: $71,652

Small group market: $0

The United States Life Ins. Co. in the City of New York

Individual market: $20,319

Small group market: $0

UnitedHealthcare Insurance Company of the River Valley

Individual market: $0

Small group market: $79,822

Source: U.S. Department of Health and Human Services

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