Four state health insurers will return a total of $57.5 million to small employers and individuals over the coming weeks because too many premium dollars collected last year went into administrative expenses and surpluses rather than medical care.
The rebates from Massachusetts health plans were about 3.2 percent more than the $55.7 million refunded last year under the state’s “medical loss ratio” requirement that at least 90 percent of premiums be used to pay doctors and hospitals for care. “This will put money back in the pockets of small businesses and individuals,” said Barbara Anthony, the state’s undersecretary of consumer affairs and business regulation. “It’s a reflection of the high standards we have in Massachusetts for protecting consumers.”
Insurers will begin sending out notices and checks next week to customers in the small group market, which includes nearly 720,000 people. About 85,000 of them are sole proprietors and others who buy health insurance as individuals. The rest work for tens of thousands of businesses and other small employers that will receive the rebate checks. Those employers must use the rebates to reduce next year’s health expenses or invest in wellness programs for employees. Employees who work for the small businesses won’t receive individual rebates.
Tufts Health Plan will refund $33.4 million, the largest amount, followed by Harvard Pilgrim Health Care with $13.5 million in rebates, Neighborhood Health Plan with $6.6 million, and Fallon Community Health Plan with $4 million, according to figures compiled by the Massachusetts Association of Health Plans, an insurance industry trade group.
For the second year in a row, Blue Cross Blue Shield of Massachusetts, the state’s largest health insurer, will not issue rebates because it put less than 10 percent of premiums toward its surplus or expenses such as claims administration, call centers, and regulatory reporting.
Association senior vice president Eric Linzer said that “plans try to estimate what the medical spend will be as best they can” but often make their projections more than a year in advance and can’t anticipate changes in the marketplace, such as declining claims. In addition, he said, Massachusetts requires the highest share of premiums going to medical care of any state.
One factor driving the lower claims was tougher contracts negotiated — and in some cases renegotiated — between insurers and health care providers that bill them for medical services. Another is a continuing decline in “utilization,” the industry’s term for people making fewer visits to doctors and ordering fewer tests and procedures. That trend began during the 2009 recession and has continued.
“Although the [premium] rates are actuarially sound and are approved by the state commissioner of insurance, we’ve exceeded our expectations of how well we’ve been able to work with providers in renegotiating costs and with our members on wellness programs and getting the right care in the right place,” said Tufts chief executive James Roosevelt Jr.
Harvard Pilgrim chief executive Eric Schultz said insurers are making progress “bringing our premiums very close to where the actual medical expenses are” but are happy to issue rebates to members in cases where spending on medical services was lower than expected.