Health insurance giant Blue Shield of California owes $82.8 million in rebates to consumers and small employers under requirements of the federal health law.

The majority of that money, $61.7 million, will be divvied up among 454,000 individual policyholders who had Blue Shield coverage in 2014. The average rebate is $136.

The remaining rebates of $21.1 million are owed to about 19,000 small employers. Customers will receive their money by the end of next month, according to the San Francisco insurer.

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California’s two other big health insurers, Anthem Inc. and Kaiser Permanente, said they won’t have to issue rebate checks this year under the Affordable Care Act.

The refunds are required when insurers fail to spend a minimum of 80% of premiums on medical care for individual and small-business customers.

Blue Shield said it fell short of that mark, spending 76.8% of premiums collected on medical care in both its individual and small employer business last year.

The company said it missed the mark on premiums, in part because it wasn’t entirely sure how the first year of Obamacare enrollment would turn out.


“It reflects a lot of the uncertainty in the marketplace we were entering into with the Affordable Care Act,” said Blue Shield spokesman Steve Shivinsky.

While rebates are welcome, some consumer advocates say sizable refunds are a sign health insurers were overcharging to begin with.

Nationwide and in California, the amount of health insurance rebates has been decreasing in recent years as companies got better at estimating medical costs.

U.S. health insurers paid out $332 million in customer rebates last year, down from $500 million in 2013.


Blue Shield’s rates have come under increasing scrutiny after it was disclosed this year that the state’s Franchise Tax Board revoked the company’s state tax exemption.

According to documents reviewed by The Times, state auditors criticized the company for stockpiling “extraordinarily high surpluses” — more than $4 billion — and for failing to offer more affordable coverage.

Blue Shield is appealing the tax board decision and said it intends to remain a nonprofit insurer regardless of the outcome.

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For 2016, Blue Shield is raising rates by an average of 4.6% for individual customers statewide, according to a regulatory filing. The average premium increase is slightly lower at 2.3% inside the Covered California exchange, where consumers can qualify for federal subsidies.

Blue Shield said it will send letters and rebate checks to all eligible customers by Sept. 30.

Not all of an insurer’s policyholders get money back, and the amounts will vary based on the premiums people paid in 2014.

For small businesses, the money goes to the employer and the company is expected to share the rebate, based on the percentage workers contribute to their annual premiums.


Twitter: @chadterhune

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