For Immediate Release - June 26, 2012

Patrick-Murray Administration Approves $56.8 Million in Health Insurance Rebates for Small Businesses and Individuals

Consumers, employers enjoy savings from state's cost containment efforts

BOSTON – June 26, 2012 – The Commissioner of the Patrick-Murray Administration's Division of Insurance, Joseph G. Murphy, today announced that individual citizens and small employers in the Commonwealth will benefit from nearly $57 million in rebates from five of the state's largest health insurers.

The rebates will be delivered to 50,000 individual policyholders and an additional 50,000 small businesses and their employees. Individuals will receive on average $205 and businesses will receive on average $936. The exact amount of the rebate will be based on the carrier and plan in which the participants are part. The $56.8 million in rebates, determined by the Division in concert with the insurance carriers, is approximately $10 million more than the carriers had initially estimated and reported to the Division.

"This is real money back into the pockets of small businesses and consumers," said Governor Deval Patrick. "I am proud of the cost containment work my administration has accomplished working with the legislature and health insurers. This shows that working together we will be able to crack the code on healthcare costs."

The rebates reflect a portion of the difference between what the insurance carriers charged in premiums and what insurers actually spent on healthcare costs in 2011. Under Massachusetts law, health insurers last year must have spent at least 88 percent of the dollars collected from premiums on medical costs. Insurers that spent less than this amount are required to rebate part of the difference back to the individuals and small employer policy holders.

"These rebates are another example of how Massachusetts changed the health insurance landscape in 2010 by tackling skyrocketing health insurance costs head on," said Commissioner Murphy. "Insurers in this state understand that their operations remain under careful scrutiny to ensure that cost control and containment remain a priority going forward."

Under Massachusetts law, rebates must be calculated within six months of the end of each calendar year. Payments are made to individuals who purchase their own insurance, or to employers in the small group market that purchase insurance for their employees. Rebates either will be paid directly or will be credited toward the cost of future premiums.

The five carriers paying rebates for 2011 are: Fallon HMO, Harvard Pilgrim HMO, Harvard Insurance Company, Neighborhood Health Plan and Tufts HMO. About 50,000 individual policy holders and nearly 50,000 employers will receive rebates. Customers of these carriers who have questions about rebates should contact the company directly. Not every Massachusetts insurer owed rebates. Those insurers that spent less than 12 percent on administrative costs and overhead are not part of the rebate process.

"It is gratifying that a number of Massachusetts carriers met the goal last year that 88 cents of every premium dollar had to go to actual health care costs," said Barbara Anthony, Undersecretary of Consumer Affairs and Business Regulation, which oversees the Division of Insurance. "They demonstrate that administrative efficiencies can be achieved to enhance the health care resources delivered to working families."

Over the last two years, the Patrick-Murray Administration and Division of Insurance have made health care cost containment a priority, and consumers are seeing the results of those efforts. Along with the pending rebates, average base rate increases in health insurance premiums for the third quarter of 2012 are 0.7 percent, compared to proposed average increases of 16 percent in April 2010. Earlier this year, carriers were authorized to offer their customers limited or tiered network plans which cost at least 12 percent less than full network "regular" plans were implemented, and the Division of Insurance approved the two first group purchasing cooperatives, which allows small businesses and individuals to combine market power and seek out better health insurance rates. The Administration continues to support legislation that would further cost containment efforts, including through payment reform, and anticipates legislation will be finalized before the end of the session.

The Division of Insurance is an agency within the Office of Consumer Affairs and Business Regulation. Follow the Office at www.mass.gov/consumer, its Consumer Connections Blog and at its Twitter feed, @Mass_Consumer. Find the Division of Insurance at www.mass.gov/doi or on Twitter @MassDOI.

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