27 September 2010

Blue Cross to refund $156 million in N.C.

USA Today

Health insurance regulators in North Carolina have identified nearly $156 million in refunds owed to Blue Cross policyholders because of changes coming under the nation's new health law.

Consumers with policies at other companies across the nation also may deserve refunds, says North Carolina Insurance Commissioner Wayne Goodwin. He plans to urge other states to probe potential overcharging for a type of reserve fund.

The health care law will dramatically change how health policies are sold in 2014, and many plans in effect now will cease to exist that year in their current form. Yet state regulators who scrutinized a recent rate increase request by Blue Cross and Blue Shield of North Carolina say they discovered the insurer was collecting reserves to pay claims beyond 2014.

Discovering this took "heavy lifting" by financial experts at the department, Goodwin said, adding: "Since the passage of the federal health reform law we've ramped up our interactions with the insurance companies we regulate."

The result: Blue Cross has agreed by year's end to send refunds to more than 215,000 North Carolina policyholders with individual plans in force on March 23 — the date the new health law was enacted. The refunds announced Monday will vary depending on premiums paid, but will be worth about a month and a half's premiums. For an average policy holder, that's $690, said Brad Wilson, the insurer's president and CEO.

Wilson said the reserves being refunded are portions of consumers' premiums that the insurer set aside in the early years of a policy to keep monthly payments more stable over the life of the policy, as the person's medical expenses increased. "Blue Cross maintained this money on behalf of our customers and now it is time to release it," he said.

Blue Cross' group policies didn't use this kind of reserve, company spokesman Lew Borman said.

It's unclear what percentage of health policies nationwide use similar "active life reserves" formulas in setting rates and whether policyholders in other states also deserve refunds. Several industry groups and insurers contacted by USA TODAY, including America's Health Insurance Plans, either didn't know or didn't respond to interview requests. Brett Lieberman, spokesman for the Blue Cross and Blue Shield Association, which represents 39 independent companies, said: "We're not aware of this being a broader issue."

Steve Larsen, who heads insurance oversight at the U.S. Department of Health and Human Services, said there may be others. "I really do think there may be a bigger issue at work here," he said.

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