Business

Four Massachusetts health insurers to rebate $46 million

Companies failed to hit benchmarks on expenditures

Four health insurers will return $46 million to Massachusetts customers in the coming weeks because the companies spent too much money collected as premiums on administrative costs and surpluses in 2011.

Tufts Health Plan will return the most — about $25 million. About 5,000 members who have an individual Tufts plan will get an average rebate of $260. About 14,000 small businesses will receive an average rebate of $1,700.

The rebates are the result of a 2010 state law requiring insurers to use at least 88 percent of their premiums for medical care. The insurers said they failed to meet that benchmark primarily because people visited doctors and used other services less than expected in 2011, the result of a slow economy.

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“It’s just the unpredictability of the utilization right now,” said Tufts spokeswoman Sonya Hagopian. “It’s really affecting the marketplace.”

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Tufts could not immediately provide how much it spent on medical costs last year.

Harvard Pilgrim Health Care will return an average of $100 to about 15,000 individuals and $600 each to 19,000 small group members, for a total of $12.5 million. The insurer spent 86.6 percent of premiums on medical costs last year, spokeswoman Joan Fallon said.

Fallon also cited the drop in medical services and said the insurer has worked to cut costs up front, including negotiating with hospitals for lower-cost contracts.

“We're really committed to keeping premium increases down,” she said.

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Fallon Community Health Care will return $7 million to about 16,000 individuals and small group members, with an overall average rebate of about $425. Spokeswoman Christine Cassidy said the plan spent about 84.8 percent of premium dollars on medical costs last year for this market.

Neighborhood Health Plan will issue $1.6 million in rebates to 27,394 individuals and small businesses, with most rebates totalling at least $50, a spokeswoman said.

State officials were still reviewing the insurers’ filings, submitted Thursday, said Dan Rosenfeld, spokesman for the Division of Insurance.

People who have individual plans will receive the rebates directly, while the money returned to group plans will go to the employer. Rebates will be issued as credit to current enrollees. Insurers will send checks to those affected who are no longer enrolled in their plans.

The state’s largest insurer, Blue Cross Blue Shield of Massachusetts, will not issue rebates because it met the state’s 88 percent threshold for spending on services for small group and individual customers, a spokeswoman said.

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Under the state law, the threshold will increase to 90 percent in 2012, above what other states require. The loss ratio provisions are set to expire this year, though lawmakers are considering extending them.

For large companies and organizations, the insurers also must meet a threshold for spending on medical care of 85 percent under the federal Affordable Care Act. The insurers were required to notify the government Friday whether they met that standard. About $1.3 billion in rebates are expected to be returned this year to insurance customers across the country, according to a Kaiser Family Foundation analysis. Analysts say the national law is likely to have a minimal impact on insurers in Massachusetts because the state law holds them to a higher standard.

Eric Linzer, spokesman for the Massachusetts Association of Health Plans, said the rebates show that the state law is working as designed.

“The law was anticipated to establish a standard, and it’s demonstrated that plans are doing their part to try and control health care costs,” he said.

More must be done to pressure hospitals and doctors to reduce their prices, Linzer said.

The rebates are welcome, said Bill Vernon, Massachusetts director of the National Federation of Independent Businesses, representing about 8,000 businesses, most of whom have a small group plan.

“It’s a continuation of the trend, and small businesses are happy that the trend’s going down,” Vernon said. “But it’s coming off a very high base.”

Chelsea Conaboy can be reached at cconaboy@boston.com. Follow her on Twitter @cconaboy.