NY Requires 11 Health Insurers To Refund $114.5 Million

New York Gov. Andrew Cuomo ordered 11 health-insurance companies including a WellPoint Inc. (WLP) unit and Aetna Inc. (AET) to refund a total of $114.5 million linked to what the state called "overcharges" on premiums last year.

The biggest refund, of $61.1 million, comes from WellPoint's Empire Blue Cross Blue Shield, according to a press release from New York's Department of Financial Services. Excellus, a nonprofit Blue Cross Blue Shield plan, was ordered to refund $21.4 million, the next-largest amount. Aetna is required to refund $11.5 million, the state said.

Due to changes made last year, the state requires insurers to spend 82% of premium revenue on medical care and refund the difference to policyholders if the companies spend under that level. The federal health-care overhaul law also set requirements for spending levels on medical care.

Cuomo, in the release, said the refunds "should serve as a message to companies that we are watching, and we will not tolerate any action that wrongly hurts the finances of the people of New York."

But insurers took issue with the notion they have overcharged. According to the New York Health Plan Association, the state is announcing refunds based on 2010 rates that were filed in 2009, before the state changed requirements.

The Department of Financial Services "changed the rules in the middle of the game" and "wrongly characterizes this as overcharging," the New York Health Plan Association said in an emailed statement.

Aetna spokeswoman Cynthia Michener said the "overwhelming majority" of the insurer's New York business met the state's requirements, and said Aetna's rebates are caused by the state backdating its mid-2010 changes to January last year. "If the law had not been applied retroactively, we would have had the opportunity to price our business appropriately," Michener said.

For-profit insurers including Aetna and WellPoint have posted strong earnings this year as economic turmoil continued to slow the pace of patients using health-care services. The light traffic in operating rooms and doctors' offices means fewer bills for insurers to cover.

New York's Financial Services department said refunds in that state are linked to policies covering nearly 574,000 people. Most of the refunds are for policies covering people in the large-group market, where plans cover 51 or more members.

-By Jon Kamp, Dow Jones Newswires; 617-654-6728; jon.kamp@dowjones.com

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