Blue Shield of California will refund $25M to its customers

For the second year in a row, Blue Shield of California will issue tens of millions of dollars’ worth of rebates to its customers.

The Affordable Care Act’s medical loss ratio provision requires insurers covering small businesses and individuals to spend at least 80 percent of premiums on medical care or other quality-improvement efforts. Because Blue Shield spent 77 percent of the premiums it collected on medical expenses last year, the health insurance company will pay 240,000 of its customers with employer-based plans a total of $25 million this year, California Healthline reports.

Last year, Blue Shield issued rebates totaling over $80 million--most of which went to individual policyholders and the remainder to small employers. In 2012, the insurer refunded $50 million to its members as part of its pledge to limit net income to 2 percent of revenue, following the $470 million in rebates it issued for 2010 and 2011.

Blue Shield is also under scrutiny from the state’s Department of Managed Health Care, which is looking into complaints that the insurer shortchanged consumers on the rebates it paid out last year, the California Healthline article notes. A pending lawsuit makes the same claim.

“The fact that it had to issue rebates again this year shows that … consumers are being overly charged,” Dena Mendelsohn, staff attorney for Consumers Union, the non-profit advocacy arm of Consumer Reports, told the publication.

But Mia Campitelli, a Blue Shield spokeswoman, told California Healthline that the insurer fell short of the 80 percent threshold for medical spending because many customers moved to new plans that complied with the ACA’s more comprehensive coverage rules.

A 2015 report from The Commonwealth Fund noted that from 2011 to 2013, the amount of total rebates that insurers paid to consumers dropped by more than two-thirds. “Federal regulation of MLRs appear to be producing significant consumer benefits without causing any substantial harm to the insurance markets," the report concluded.