ACA cap on profits results in NC insurers refunding $8.5M

Health insurance companies must refund $8.5 million to more than 162,000 North Carolina residents under a corporate profit cap instituted by the Affordable Care Act.

The refunds, announced this week by the N.C. Department of Insurance, are part of the nearly $470 million in refunds issued to 5.5 million customers nationwide who were overcharged by their insurance companies under ACA standards.

The federal insurance law requires health insurers to spend at least 80 percent of collected premiums on medical claims and health care. For customers insured through large employers, the insurers must spend at least 85 percent of premiums on health expenses. The ACA cap is one of a number of measures designed to cut rising health care costs.

Insurers are required to refund any money they collect above those limits, which came to nearly $8.5 million refunded to 162,234 customers here, or $81 per customer on average. The bulk of those refunds – more than $5.7 million to 116,800 customers – will be made by UnitedHealthcare to its customers.

The nation’s largest health insurer, United routinely refunds millions of dollars annually to customers in North Carolina. United refunded $5 million here a year ago, $7 million the year before, and $11.3 million for 2011 policies, according to federal records.

United said it will pay a total of $117.6 million in 2014 rebates across the United States, which amounts to less than 1/2 of 1 percent of the insurer’s total annual premium across its commercial business. This averages out to $16.14 per person, United spokeswoman Tracey Lempner said by email.

North Carolina’s largest health insurer, Blue Cross and Blue Shield, has never been required to issue refunds since the ACA’s medical loss ratio rule went into effect four years ago. The Chapel Hill company has said it has spent more on health care every year than the minimum required by the federal spending limit, paying out between 87 percent and 91.3 percent of premiums collected on medical claims, depending on customer category.

But Blue Cross has also warned its approach is not sustainable. It lost $50.6 million last year because of high medical expenses associated with ACA customers, and Blue Cross is now raising ACA rates by an average of 32.5 percent in 2016.

“They got clobbered on this ACA pool and they came back with a colossal rate increase,” said Rob Luisana, an insurance broker in Greensboro.

Under the federal medical loss ratio rule, there is no benefit to low-balling premiums to attract customers because insurers can’t charge customers extra at the end of the year if they underestimated and charged too little. “If they shoot low they can’t go back and get the money,” said Apex agent Rufus Langley.

In North Carolina, United is refunding customers who purchased individual policies through a subsidiary, the Golden Rule Insurance Co.; customers insured through small businesses by UnitedHealthcare Insurance Co.; and to large employers who insured their workers through UnitedHealthcare Insurance Co. and UnitedHealthcare of North Carolina.

In all, 11 insurers are required to issue refunds in North Carolina for 2014 health insurance. Of those, Connecticut General plans to withdraw from the North Carolina market as of Dec. 31, and Mid-West National Life insurance Co. of Tennessee withdrew from the state earlier this year, said Kerry Hall, spokeswoman for the N.C. Department of Insurance.

John Murawski: 919-829-8932, @johnmurawski