Former Blue Shield executive accuses insurer of shortchanging California policyholders

Blue Shield of California's former public policy director has filed suit against the insurer, claiming it didn't adequately reimburse policyholders for excessive administrative spending in 2014, reports the Los Angeles Times.

The California Franchise Tax Board revoked Blue Shield of California's state tax-exempt status in 2014. Once news of the state's move surfaced, Michael Johnson resigned as the insurer's public policy director and launched a public campaign calling for Blue Shield of California executives to convert the company into a for-profit insurer and to return billions of dollars to the public.

Mr. Johnson continued his fight this week by filing suit against his former employer. In his complaint, Mr. Johnson alleges that Blue Shield of California misreported its medical loss ratio in 2014, and that the company owes rebates to policyholders.

Under the Affordable Care Act, insurers selling individual health plans are required to have a medical loss ratio of 80 percent, meaning they must spend at least 80 cents out of every premium dollar on customers' medical care. If an insurer's ratio falls below 80 percent, it is required to issue a premium rebate to customers.

Blue Shield of California's MLR fell below 80 percent in 2014, and the insurer was required to refund customers more than $64 million, according to the report. In his lawsuit, Mr. Johnson claims the insurer owes additional rebates because its 2014 MLR was lower than it reported.

Blue Shield spokesperson Steve Shivinksy dismissed the allegations. "Mr. Johnson's latest assertions are misinformed and incorrect. He is a disgruntled former employee and frequent critic," Mr. Shivinsky told the Los Angeles Times.

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