Blue Shield overcharged for 2014 coverage, will pay rebates

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Blue Shield of California will have to pay rebates of over $100 per enrollee and turn over $93 million in excess profits to the federal government because it overcharged for coverage sold to individuals in 2014, according to data the health plan submitted Friday to regulators.

Health insurers are required under Obamacare rules to pay rebates to members if medical expenses account for less than 80% of the premiums collected in a given year. In addition, insurers must pay the federal government a portion of any profits above specified levels, payments that the government uses to offset excess losses experienced by other insurers.

In a regulatory filing in support of its planned rate increases for next year, Blue Shield reported that it expects to pay $93 million to the federal government and $54 million to its enrollees based on its 2014 results. Spread among the health plan's 503,829 individual plan members, the rebate payments would average $107 apiece. 

The actual amounts could end up higher. A key element in calculating rebates is the total amount of Obamacare “premium stabilization” payments received by a health plan from the federal government. In its rate filing, Blue Shield estimated getting $461 million. But the government reported in June making total payments of $498 million to Blue Shield for its individual market business. Using the higher figure would produce a higher rebate amount.

Blue Shield must submit to federal regulators the final calculation of its 2014 rebate payments by August 31 and mail checks by September 30.

Update 8/5: The LA Times reported today that Blue Shield told the paper that it would be required to pay a total of $61.7 million in rebates to its individual customers or an average of $136 per enrollee. This is more than Blue Shield reported in its rate filing, and is likely due to the discrepancy described regarding the premium stabilization payments Blue Shield received.