Corporate Research Group’s Weblog

Here are the facts in two parts:

1. Blue Cross Blue Shield of North Carolina agreed to refund $155.8 million to approximately 325,000 individual health plan members (215,000 policies) at the request of state regulators.  The refunds will come from the plan’s active life reserves, essentially a portion of premiums put aside in the early stages of a policy to help hold down rates in the future.  Since the life of individual policies will be shortened by the introduction of new plans through insurance exchanges in 2014, there’s a pile of money left over.  The DOI lacks the authority to force BCBS-NC to refund the money; however, the plan still agreed.

2. The DOI granted BCBS-NC a 5.37% rate increase for its Blue Advantage individual plan, 160 basis points lower than the 6.97% hike that BCBS-NC wanted.  The state did approve BCBS-NC’s request for a 2.06% increase for the company’s Blue Options individual product.

Now the spin.

It’s not exactly clear what BCBS-NC gains by agreeing to the refunds – except perhaps a wee bit of goodwill at a time when health plans are being cast as villains.  I emphasize “wee bit.”  A member who pays $380 monthly for individual coverage would receive a $690 refund — about 1.5 months of premiums.  “I don’t know exactly what they stand to gain,” says a state DOI spokeswoman.  “That’s a good question,” says a BCBS-NC spokesman adding, “We’re rolling with the change.”

While the DOI can’t order refunds, it can initiate a rate hearing or take you to court.  That could have been ugly for BCBS-NC, an organization badly in need of some positive PR following the North Carolina State Health Plan fiasco and the embarrassing leak of planned anti-reform ads.  The timing is also right.  It’s a one-time refund tied to reform, and the company has a new chief executive who’s calling for change.

A bigger question is whether regulators in other states will now be tipped to the issue.  “WellPoint is among the most exposed,” says Charles Boorady of Credit-Suisse, adding that UnitedHealth and Cigna are among the least.

This entry was posted on Tuesday, September 21st, 2010 at 10:38 am and is filed under Managed Care. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.