Dive Brief:
- A new complaint against Blue Shield of California argues the insurer shortchanged its individual policy holders on their rebates for 2014.
- The dispute revolves around administrative errors Blue Shield made in 2014 as it entered the new insurance marketplace created under the Affordable Care Act, the Los Angeles Times reported.
- The insurer has been the target of multiple investigations since it lost its state tax-exempt status in 2014, was slammed for its large surpluses in a 2015 state audit, and then took further heat for a lack of transparency over executive compensation.
Dive Insight:
The complaint comes down to whether Blue Shield properly accounted for its 2014 errors in which it reportedly paid millions in claims it should not have covered due to enrollees dropping coverage or obtaining out-of-network care.
The insurer included the over payments when reporting what it spent on medical claims and administrative costs. The move impacted its medical loss ratio (MLR) and lowered what it was required to pay back its costomers in refunds, which it owed because the company didn't meet the standard of spending 80% of customer’s premiums on healthcare.
“The purpose of the MLR reform is to make transparent and limit the portion of premiums that insurers devote to profits and administration,” argued former Blue Shield public policy director Michael Johnson in his complaint. “By counting the costs of administrative mistakes as medical spending, Blue Shield is making a mockery of the law." He suggested the company's customers have been cheated and that their protection under the ACA has been undermined.
Blue Shield spokesman Steve Shivinsky told the Times Blue Shield was not required to deduct the excess medical payments.