Customers in Montana get partial returns on their health insurance premiums. - Montana Free Press

Nearly 16,000 Montanans who bought Blue Cross Blue Shield insurance through the marketplace will get a partial refund for premiums paid in the years between 2018 and 2020.

According to the Affordable Care Act, insurers offering plans on the exchange must spend a specific percentage of premiums on medical or health-related expenses such as doctor visits, drug prescriptions, and hospital stays. If an insurance firm fails to meet this obligation, it must reimburse its clients for their premiums.

Members who have insurance through the large group market must meet an 85 percent Medical Loss Ratio criteria, whereas members who have insurance through the individual market must meet an 80 percent Medical Loss Ratio level. The Medical Loss Ratio is calculated by examining an insurance company's spending over a three-year rolling period. If an insurer spends more than 15% of premiums on administrative costs or profits (in the large group market) or 20% of premiums on administrative costs or profits (in the individual market), the insurer must issue a premium refund equal to the proportion by which it surpassed the threshold. BCBS spent 72.3 percent of the $127 million in Montana premiums it received on health care and actions to improve health care in 2020, falling 7.7% short of the 80 percent threshold.

A total of 15,782 Montanans who purchased BCBS insurance through the individual marketplace between 2018 and 2020 are eligible for a refund, which BCBS must issue by Sept. 30. Members will receive reimbursement in the form of a check or a credit toward future premium payments. The average compensation is $623.

Eligible insurance consumers don't have to do anything to receive the reimbursement, according to John Doran, vice president of external affairs for Blue Cross Blue Shield of Montana. However, if they don't receive a notice in the mail or misplace the check, they can call the number on the back of their insurance card for assistance.

“Last year, we saw a lot of disruption to a typical health-care year, if such a thing exists.”

Blue Cross Blue Shield of Montana's vice president of external affairs, John Doran

According to Doran, the corporation determines premium rates based on data from the preceding two years on the cost and demand for medical services. While BCBS seeks to align premiums with these computations, he warned that variabilities can make staying within the Medical Loss Ratio problematic. The corporation is required to offer reimbursements when this happens, as it did this year.

BCBS, according to Doran, also provided a payment last year. He said it was the first time the company had to issue one since it began selling health-insurance plans on the Affordable Care Act marketplace in 2014.

“There are a lot of variables that can influence the amount we pay or don't pay in a particular year when we anticipate forward. Variations in actual claims may cause certain group — or in this case, individual — policies to fail to meet the Medical Loss Ratio rules, resulting in a reimbursement,” Doran explained. “The Medical Loss Ratio rule is designed to shield consumers from some of the rate-setting process's risks. The fact that we are issuing refunds this year is simply an evidence that the system is functioning properly.”

People were getting new coverage, losing coverage due to layoffs, or transferring insurance providers as a result of the epidemic, according to Doran. Health-care delivery, he claimed, has been disrupted in a similar way.

“Last year, we saw a lot of disruption to a typical health-care year, assuming such a thing exists. Most hospitals across the state, and even across the country, were so overloaded with COVID patients during the peak of the pandemic that they had to stop performing standard elective surgery like knee replacements and hip replacements.”

He anticipates the pandemic's interruptions to last until 2022, according to him.

According to Doran, around 22,000 Montanans receive BCBS coverage through the individual exchange marketplace. Mountain Health Co-op (previously Montana Health Co-op) is another company that covers 19,257 Montanans who bought policies on the individual market. This cycle, Mountain Health Co-op was not obligated to issue reimbursements, as it has never been needed in the past. PacificSource, the only other provider offering health insurance through the Affordable Care Act exchange in Montana, was not required to issue reimbursements for the 2018-2020 term, although it did so for the 2017-2019 period. According to PacificSource spokesperson Lee Dawson, the company insures 9,300 customers who purchased coverage through the Affordable Care Act exchange.

Sam Loveridge, a spokesperson for the Montana Commissioner of Securities and Insurance, agreed with Doran that 2020 was a tumultuous year, with most insurers spending less on claims than expected, “likely owing to the pandemic.” In an email, he said he expects insurers' performance on the Medical Loss Ratio benchmark for the 2018-2020 period to be affected by the interruptions.

According to the Centers for Medicare and Medicaid Services, Montana insurers issued more than $15 million in reimbursements to 29,135 customers during the 2017-2019 cycle, the most recent period for which comprehensive data is available.

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