Blue Shield California Refunds Excess Insurance Profit to Customers
As part of a voluntary pledge to give customers affordable health insurance, Blue Shield of California is refunding customers over $400 million. A portion from health insurance profits will be refunded this month based on 2010 earnings and customers will receive additional credits in December based on 2011 earnings.
Blue Shield of California first announced the plan to refund policyholders back in June. Based on 2010 figures, the company announced an overall refund of $167 million. “With our 2 percent pledge, we hope to make coverage a bit more affordable for our members,” said Bruce Bodaken, Blue Shield’s chairman and chief executive.
The refund was issued in the form of a 30% credit toward one month’s insurance premium. A family of four, for example, received about $250 toward the cost of their policy. Hospitals and doctors that participate in programs aimed at better coordinating care for patients received $10 million overall, and the insurer’s foundation received $3 million.
The December refund of $295 million will be credited in much the same way. An eligible individual – one who has had fully insured continuous coverage from August 1st through at least December 1st - will receive approximately $135 on average while a family of four will be credited about $420, per a press release by Blue Shield of Ca.
Employers will also receive credits as well. Small business will receive an average of $220 per employee, while larger companies will receive an average of $195 per person. Self-funded groups are not eligible for the credit.
How is the company able to return profits back to its customers? Bodaken says that the weak economy has caused customers to cut back on medical care, thereby reducing the amount spent by the insurance company. "People are really struggling to make ends meet," he said in an interview last week. "As people have less discretionary spending, they're deciding that maybe they will put off that hip or knee replacement until they can afford it."
Under the regulations of the health reform act, insurers must spend at least 80% of consumer premiums on medical care and cannot reserve excess income for administrative costs or profit.
Although other insurance companies have made similar pledges to refund customers of excess profit from 2010 and 2011, it is not likely the rebates will continue beyond this year. Anthem Blue Cross spokeswoman notes that the cost of medical care, the primary driver of healthcare costs, is increasing rapidly and has a significant impact on how much of each dollar goes for medical services.
Blue Shield of California is a non-profit independent member of the Blue Cross Blue Shield Association with 3.3 million members, 4,800 employees, and one of the largest provider networks in California. It was founded in 1939 and is headquartered in San Francisco.