Recently Blue Cross Blue Shield of Tennessee (BCBST) sent out the following letter to all members of employer sponsored group health plans.  We understand that this letter is somewhat confusing and therefore would like to take a moment to clarify. 

One aspect of the Affordable Care Act was to require insurers to utilize premiums appropriately.  Ideally, insurance carriers would spend 80 cents of every dollar toward medical claims for small groups, and 85 cents of every dollar on claims for large groups.  This percentage is known as the Medical Loss Ratio (MLR).  The remaining 15-20% of the premium is designed to cover marketing and administrative expenses of the carrier.

Simply stated, if an insurer does not expense a specified minimum percentage of the premiums it receives toward the cost of health care services then the insurer is required to rebate the difference to its members.  For the most recent year 2011 BCBST met its required MLR for both the large (85%) and small (80%) group market, and therefore will not be issuing premium rebates to its commercial clients.

If you have additional questions concerning this letter please do not hesitate to contact us at 615-446-3303.