Blue Cross & Blue Shield of Rhode Island will pay $1.8 million in restitution and a record fine of $325,000 through an agreement with state regulators over how it “misinterpreted” the way health status should be calculated.
Christopher F. Koller
Under the terms of the settlement, the Blues affiliate will complete restitution payments by the end of the year.
Rhode Island Health Insurance Commissioner Christopher F. Koller, whose office oversees health insurers, said in a statement the agreement comes following a market conduct examination of the insurer’s rating practices in the small employer market, those with 50 or fewer employees.
Initiated in 2008, the examination was conducted over concerns the company was not correctly applying a health-status rating factor when determining premiums for its customers in the small-employer market. The health-status rating factor, banned by state legislators last year, permitted an insurer to adjust a group’s rates up or down by 10% based on an evaluation of the group’s overall health.
The Rhode Island review found that the insurer’s rating formulas set the health status too low for most group, but also too high for others, leading to many groups being undercharged and others overcharged.
“The health status rating factor was difficult to administer, unfair to people in poor health and subject to the kinds of misapplication documented in this examination,” Koller said in a statement. “The results of the examination justify the General Assembly’s prohibition of further use of the rating factor by Rhode Island health insurers.”
Laura Calenda, a spokeswoman for Blue Cross & Blue Shield of Rhode Island, told IFAwebnews.com that the company “misinterpreted how health status should be calculated.
“We now recognize the error, apologize for any inconvenience that this may have caused and will be issuing refunds to small group employers,” Calenda said via e-mail. “As of 2009, health status is no longer a factor in determining rates. As Rhode Island’s local, non-profit health insurer, Blue Cross & Blue Shield of Rhode Island believes that every Rhode Islander should have access to affordable, high quality health insurance, regardless of pre-existing conditions.”
Koller’s office said the Blues paid the largest fine imposed against a health insurer by the agency or its predecessor agency, the Rhode Island Department of Business Regulation.
R.I. Blues pay record fine, to reimburse $1.8 million over ratings via IFAwebnews.com .
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