Blue Shield to Cap Earnings, Pay Refunds to Customers

One of California's biggest health insurers will cap its earnings and credit some policyholders if it exceeds the limit as part of an emphasis on policy affordability over company profits.

Blue Shield of California Chairman and CEO Bruce Bodaken called on others in the health care system, including doctors, drug companies and insurers, to focus more on affordability as he detailed on Tuesday his company's goal to generate no more than 2 cents in profit for every dollar in revenue.

"Everyone is going to have to do the kind of soul searching we've done over the past year to make this decision," he said.

The move will likely have little impact on the main thing customers care about-- the premiums they pay for coverage said Robert Laszewski, an industry consultant and former insurance executive.

"I think it's great public relations because it sort of states what they have been doing anyway," he said.

The San Francisco-based insurer said it will start its new policy based on its performance last year, and that means it will return $167 million to policyholders. Blue Shield earned about $315 million last year on roughly $10.1 billion in revenue. That resulted in a 3.1 percent profit margin, which is above its 2 percent limit.

The money will be returned in October in the form of a premium credit. Blue Shield has about 3.3 million members, and about 56 percent of those customers will receive the credits.

Customers with individual insurance policies can expect credits of about $80 for a single policy and $250 for one that covers a family of four. People with employer-sponsored group coverage can expect credits of between $110 and $130 per employee. The insurer
also will give some money to hospitals, doctors and not-for-profit groups.

Bodaken said Blue Shield will remain committed to the cap as long as it stays financially solvent and can make investments to remain competitive.