BlueCross BlueShield refunds $22.6 million to Tennessee customers
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BlueCross BlueShield of Tennessee is making good on its obligations to policyholders by refunding them more $22 million.
The Affordable Care Act, or "Obamacare," requires health insurance companies to pay out 80% of their premiums charged for individual, small-group and large-group plans.
State regulators determined that BlueCross had only paid out 77.9% of individual premiums and 79.8% of small-group premiums for medical care, which means they must retroactively settle the difference.
Premium payouts are used primarily to pay for medical care costs. The money is also used to cover operating costs including customer service, fraud detection, and quality control measurements. After paying out taxes and the required amount of premium income, the provider keeps the leftover as net income. That money goes into the provider’s reserves.
The $22.6 million in refunds being paid to BlueCross customers this week are for medical losses below the 80% threshold that BlueCross failed to meet, representing 2.1% of its individual premiums and 0.2% of small group premiums.
BlueCross began offering Tennessee’s first statewide coverage plan under Obamacare, but it posted losses of more than $400 million in its first three years because of aggressive pricing by BlueCross and the federal program’s unexpected costs. Thanks to a stabilizing market, company decisions, and changes to Obamacare, the provider has broken even after the original losses.
The rebates reflect adjusted premiums for medical coverage in 2018. They do not reflect how much each policyholder paid or other coverage areas, such as dental care.
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This story has been updated.