Blue Shield To Return $295M as Part of Pledge To Limit Profits
On Thursday, Blue Shield of California announced plans to return a total of $295 million to comply with aÂ pledge it made earlier this year to cap profits at 2%, the San Francisco Business Times reports (Rauber, San Francisco Business Times, 10/13).
Blue Shield Chair and CEO Bruce Bodaken said the funds will be doled out in December and reflect the insurer's estimated 2011 earnings (Abelson, "Prescriptions," New York Times, 10/13).
The insurer's profit margin for this year is expected to be 4%, which officials said was the result of lower use of services, better care coordination and fewer hospitalizations (Colliver, San Francisco Chronicle, 10/14).
Background on Profit Cap Pledge
In June, Blue Shield announced a plan to cap profits at 2% of revenue and allocate any excess funds as credits to policyholders, funding for health care providers and grants to not-for-profit health care organizations. The announcement came as the California health insurers faced criticism from lawmakers, consumer advocates and policyholders over recent rate hikes (California Healthline, 6/8).
As part of the move to cap profits, the insurer in June said it would return $167 million to policyholders, and that amount was returned this month (Helfand/Hennigan, Los Angeles Times, 10/14).
Details of Latest Announcement
Blue Shield said that out of the total amount being returned in December, $283 million will be partial one-month premium credits going out to individual, fully insured business and "shared risk" policyholders (San Francisco Business Times, 10/13).
TheÂ credits will affect about two million policyholders in California (Los Angeles Times, 10/14). According to Blue Shield, the credit will be about $135 for individual policyholders and about $420 for a family of four (Smith, Sacramento Bee, 10/14).
In addition, Blue Shield's profit return includes another $10 million that will go toward California hospitals and medical groups in an effort to help them participate in accountable care organizations (San Francisco Business Times, 10/13).
The insurer also will give back an additional $2 million in community investment grants (Sacramento Bee, 10/14).
In a White House Blog post, Nancy-Ann DeParle -- an assistant to President Obama and deputy chief of staff for policy -- said Blue Shield's announcement will provide "much-needed relief" for families whose premiums have increased over the past few years (San Francisco Business Times, 10/13).
In a statement, California Insurance Commissioner Dave Jones (D) applauded Blue Shield's move but said, "Unfortunately, other health insurers and HMOs show no indication that they intend to cap skyrocketing profits orÂ rates" (Los Angeles Times, 10/14).
Jones added that Blue Shield's announcement shows the need for legislation (AB 52) that would let state regulators reject proposed health insurance rate increases that are deemed excessive.
Health industry officials have argued that greater state oversight of insurance ratesÂ is unnecessary in part because the federal health reform law requires insurers to spend 80% of collected premium dollars on direct medical costs (Sacramento Bee, 10/14).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.