Refund or Redistribution from Neighborhood Health?


Something about news that Neighborhood Health Plan of Rhode Island’s $2 million in rebates to overcharged customers is nagging at me, but since it’s become so difficult to find contacts for data inquiries in this area, I’ll just describe the question.  Here’s the basic story:

Refunds are mandated by the Affordable Care Act for policyholders whose health plans did not spend at least 80 percent of their premiums in a given calendar year on doctors, hospitals and other health care services or activities to improve healthcare quality. That leaves 20 percent for salaries, bonuses and other administrative expenses.

Because Neighborhood was essentially a Medicaid processor prior to the government’s need for easily controlled insurance providers who would make it look like customers actually had a choice through HealthSource RI, the state’s ObamaCare health benefits exchange, the organization didn’t have much experience from which to determine what to charge its new government-mandated customers.  So, it overcharged for its plans, which is also why the insurer requested a premium decrease in the upcoming year.

But here’s the thing:  Neighborhood is the lower-end provider covering 49% of all “paid” customer plans for an exchange on which 88% of plans are subsidized.  The question is, therefore, how much of this $2 million in rebates is going to Neighborhood clients because taxpayers gave the insurer too much?