New York health plans ordered to issue rebates on premiums

The federal minimum medical-loss ratio rule doesn't require health plans to pay customer rebates until 2012 if the insurers did not spend enough on care. But insurers in New York already have been ordered to give back part of customer premiums, thanks to a more stringent state rule.

New York Gov. Andrew Cuomo and Benjamin Lawsky, superintendent of the state's Dept. of Financial Services, announced Nov. 9 that 11 of the state's health insurers would have to pay a combined $114.5 million to customers after failing to meet the state's medical-loss ratio minimums for 2010.

WellPoint-owned Empire BlueCross BlueShield, at $61.1 million, represents the majority of the ordered rebates. Excellus BlueCross BlueShield must pay $21.4 million, and Aetna has to pay $11.5 million. All rebates have been paid except for those in the large group market, which represents more than $44 million of the refunds. They must be paid by Dec. 15.

The state's 82% MLR minimum was adopted June 8, 2010, as part of a "prior approval" bill that gave New York the authority to approve or deny insurers' requests to raise premiums.

The money the state ordered insurers to "refund" represents the difference between what the health plans spent and what they would have had to spend to meet the 82% threshold.

"In this economic climate, every penny counts, and, in this case, insurance companies were overcharging New Yorkers to the tune of millions of dollars," Cuomo said in a news release.

But Leslie Moran, spokeswoman for the New York Health Plan Assn., said the state was wrong to depict the payments as refunds of overcharges. Insurers set premium rates for 2010 in 2009, before they could have accounted for an 82% MLR, she said.

"In applying the higher MLR standard retroactively, the Dept. of Financial Services changed the rules in the middle of the game," Moran said in an emailed statement.

The medical-loss ratios of most states are at or below the federal minimums passed as part of the Patient Protection and Affordable Care Act. The minimums are 80% in the individual and small group market and 85% in the large group market. Due to lower-than-expected utilization in 2010, large insurers have said they are setting aside millions of dollars they expect to pay to members in states where they cannot meet the new minimums. Those rebates must be paid by Aug. 1.

Under the federal law, in cases where the state law is more strict, the state law applies.

In contrast to New York, 17 states have asked for federal waivers that would give insurers a temporary exemption from the minimums, allowing them to spend less on health care.

Insurance commissioners in those states have argued in filings with the Center for Consumer Information & Insurance Oversight that requiring insurers to meet the 80% minimum would push companies out of the market and leave customers without access to individual coverage.