11 insurers in New York have been ordered to refund overcharges on their insurance premiums. State officials ordered insurers to refund $114.5 million in overpaid premiums to almost 600,000 New Yorkers. According to the order, insurers failed to spend the minimum amount of each premium dollar on providing health care to policy holders.
Under New York law, health insurers are expected to spend a minimum of $0.82 of each dollar paid in premiums on providing health care. This requirement is in addition to a new rule mandated by the Affordable Care Act which increases the amount spent on providing health care. In total, close to $0.90 of each premium dollar is to be spent on health care for policy holders. The remaining money can then go into administrative costs and profits for the insurer.
However, according to documents from the New York Department of Financial Services insurers consistently failed to meet the $0.82 requirement causing the Governor to order refunds.
“In this economic climate, every penny counts and, in this case, insurance companies were overcharging New Yorkers to the tune of millions of dollars,” Cuomo said in the statement. “This 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.”
Individuals and small businesses should start seeing refunds as early as next week while larger business plans will go out by mid-December. Insurers including some of the nations largest – such as WellPoint and Aetna are on the hook for overcharging. Refunds amount to millions split between the state’s 11 insurance providers.
Many of these same providers recently enacted premium rate hikes and were voicing strong opposition to a new state rule that would require public release of their rate filings. The Department of Financial Services noted that all insurers have recently withdrawn any formal opposition to the rule.
“While it is a positive that consumers are getting these payments, retroactive refunds are simply not good enough. It is likely that some people dropped their insurance coverage because of premium increases. Through the prior approval law, the Department of Financial Services is working to keep rates from spiraling out of control while also ensuring consumers get refunds when insurance companies don’t spend enough of premiums on medical care,” said Superintendent of Financial Services Benjamin M. Lawsky.