Blue Cross and Blue Shield of North Carolina has a rare bit of good news for consumers struggling with surging health costs.
The state's largest health insurer announced Monday that it plans to refund $155.8 million to about 215,000 individual policyholders, a shift related to changes triggered by the federal health overhaul.
The size of the refund will be based on rates paid and will equal about 11/2 months of premiums for Blue Advantage customers. The refund could be slightly more for some. For a customer paying an average of $380 a month, the refund will be about $690. Blue Cross is planning to mail checks by the end of the year.
Blue Cross also plans to raise rates for individual policies next year slightly less than previously disclosed, under an agreement with the state Insurance Department.
That lower rate increase will save Blue Cross customers about $14.5 million next year, CEO Brad Wilson said during a news conference in Raleigh with Insurance Commissioner Wayne Goodwin.
"This is historic and very welcome news for North Carolinians," Goodwin said. "In the time we're in, every dollar is valuable."
The refund and lower rate increase could help polish Blue Cross' image and deflect criticism that it controls too much of the state's market for individual health coverage. The moves also could help Blue Cross fend off increased regulation, including tougher scrutiny of its rates.
"We're in a time of dramatic change, and as we work through this change together, it's important that we have credibility," Wilson said.
"Since we don't have shareholders, we can take this step on behalf of our customers," Wilson added.
Goodwin said he still plans to seek more authority to regulate health insurers from the General Assembly next year.
Goodwin's department recently received a $1 million federal grant to analyze ways it can improve its oversight of rates, under another aspect of the health care law.
The federal law also calls for state-run insurance exchanges that would provide coverage for individuals and small employers starting in 2014.
A critic's approval
Even if Blue Cross does have ulterior motives such as generating positive publicity, one of its toughest critics said Monday's announcement was a positive and significant step. It also could force other insurers to follow suit.
"It's a pretty big deal," said Adam Searing, project director of the N.C. Health Access Coalition in Raleigh, a consumer advocacy group that frequently attacks Blue Cross' rates and policies. "It signals that Blue Cross is looking at its nonprofit obligations more than it has in the past. That's refreshing."
A $155.8 million refund "is a lot of money to spend just for good publicity," Searing added.
New rules kick in
The money, which Blue Cross set aside as so-called active life reserves, was designed to help pay future claims and to avoid sharp rate increases over the life of individuals' policies, especially as customers age and require more medical services.
But the federal health overhaul requires health insurers to introduce new types of plans in 2014. That means the reserves aren't necessary, since existing policies will be phased out.
Both Wilson and Goodwin insisted that the refund was not the result of Blue Cross overcharging its customers, but simply because new rules changed the system.
Who gets a refund?
The refund covers 215,000 Blue Cross individual members plus their dependents, or about 325,000 people. It does not include anyone who buys insurance through a group or employer. The company covers more than 3.7 million members across the state.
The one-time refund is essentially an accounting shift and isn't money Blue Cross is required to give back. But in negotiating next year's rates with the state insurance department, Blue Cross used the money as a bargaining tool.
In August, Blue Cross had sought a 6.97 percent average rate increase for about 300,000 individual members, but it instead has agreed to an average rate increase of 5.37 percent.
Overall trend: up
The insurance department's actuaries reviewed the Blue Cross request and recommended the smaller increase, which is the lowest in four years. Wilson warned that customers will likely see higher rate increases in coming years as medical costs continue to soar and other aspects of the new health care law take effect.
Rising rates have become a sore spot for supporters of the Obama administration's health care overhaul. Health and Human Services head Kathleen Sibelius recently warned some of the nation's biggest insurers not to blame the federal law for higher premiums.
Goals for Blue Cross
"We will continue to do everything we can to hold rates down," Wilson said. That includes trying to cut Blue Cross' administrative costs as much as 20 percent by 2014.
"Affordability for all our customers is an important goal," he added.
As previously reported by The News & Observer, some individual Blue Cross customers, such as middle-aged men, will see much higher rates for 2011. About 28,000 customers, including women in their early 20s, will see rate decreases.
email@example.com or 919-829-4572