Blue Shield of California has agreed to limit its premiums for certain policies next year and in 2017, Payers & Providers reports.
Background
On Oct. 5, the California Department of Managed Health Careissued an order addressing Blue Shield’s premiums and medical loss ratio calculations.
DMHC spokesperson Rodger Butler said the agency had “significant concerns with some of the plan’s projected trends and target profit levels,” adding, “This warranted the department’s action to find a solution with the plan that will protect consumers and ensure rates are supported.”
Details of Agreement
Under the order, Blue Shield has agreed to:
- Not impose premium increases for its small group plans during the second quarter of 2016; and
- Limit premium increases for small group, individual and family plans in 2017 in relation to a 1.41% profit margin cap for individual and family plans and a 1.67% cap for small group business.
According to Payers & Providers, Blue Shield had filed an average 2016 premium increase of 4.6%, affecting about 570,000 policyholders.
Meanwhile, Blue Shield also agreed to review its medical loss ratio calculations for 2015 and 2016 (Shinkman, Payers & Providers, 10/15).
Under an Affordable Care Act provision, insurers that do not spend at least 80% of premiums on medical care must issue refunds. Last year, Blue Shield spent 76.8% of premiums on medical care. As a result, the insurer owed:
- $61.7 million to about 450,000 individual consumers, with an average rebate of $136; and
- $21.1 million to about 19,000 small businesses (California Healthline, 8/5).
Under DMHC’s order, Blue Shield will recalculate and submit by April 30, 2016, its medical loss ratio estimates for 2015 and 2016. Blue Shield will be required to issue rebates by July 31, 2016, if the recalculated medical loss ratio is below 80%.
DMHC Director Michelle Rouillard said the order was necessary because Blue Shield’s projections “have been higher than estimates” by other insurers, noting that if Blue Shield’s “actual medical costs for the products fall below [its] projections, [its] profit levels will exceed what is reasonable within the industry.”
DMHC and Blue Shield said the insurer’s approved $1.2 billion acquisition of Medicaid insurer Care1st Health Plan did not influence the agreement (Payers & Providers, 10/15).