Consistent with Affordable Care Act requirements, BlueCross BlueShield of Tennessee met the targets for the percentage of premiums spent toward medical claims and care quality for individuals and large groups for 2013, while falling just below the goal set for small groups.
A major provision of the ACA specifies that health insurers must use a minimum percentage of premiums to pay medical claims or improve care quality – known as medical loss ratio or MLR – or pay rebates equaling any amount not spent beneath the threshold.
BlueCross’ MLR for the 2013 reporting year was 81.6 percent for individuals (80 percent required) and 88.4 percent for large group (85 percent required); therefore, no rebates are required for these lines of business. With a small group MLR of 79.8 percent, the health plan was just under the required 80 percent established by the ACA and will rebate $1.7 million in premiums to approximately 10,800 small employer group policyholders this summer.
“We are committed to controlling costs and improving our members’ quality of care and overall health,” said Calvin Anderson, senior vice president and chief of staff for BlueCross. “Each day we focus on ensuring that the premiums paid by our members are used toward those goals.”
The $1.7 million rebate covers 2013 and reflects a small percentage of the small group premiums collected that year by BlueCross, which insures more small businesses in Tennessee than any of its competitors. In total, the refund equals less than 1 percent of premiums paid by the plan’s small business customers.
Exact amounts to be paid to small groups will differ based on the premium amounts paid. This varies based on several factors including months they were covered in 2013. The majority of small group administrators will receive checks with an average amount of $160. Small group policies not eligible for a rebate include Medicare Advantage, DentalBlueSM and VisionBlueSM coverage.
According to Mr. Anderson, it’s difficult to predict what the rate of medical use by members will be in advance of setting premiums. Historically, the Tennessee Plan has been within a few percentage points of its projections. BlueCross has met the MLR requirement seven out of nine times since its inception three years ago.
The health care reform law set minimum requirements for how much insurance companies are required to spend on health care services and activities to improve health quality. MLR is calculated by adding the amount spent on medical claims and quality improvement, and then dividing by the amount of premiums paid after subtracting allowable taxes and fees.
The portion of the premium not used to pay for medical services or quality improvements is used for profit, reserves and administrative expenses such as provider contracting, fraud prevention, broker commissions, and systems that support claim payment. In 2013, 2.6 percent of the company’s gross premium dollar for all insured and self-funded lines of business went toward the company’s profit margin.
Rebate checks for qualifying groups will be mailed by Aug. 1.