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Blue Shield of California to return $180 million to customers and communities Posted: June 9th, 2011

By Maryalene LaPonsie

After facing intense public and government scrutiny earlier this year for back-to-back health insurance rate hikes, Blue Shield of California is pledging to limit its net income to 2 percent of revenues. The company is applying the commitment retroactively to 2010. As a result, $180 million in health insurance premiums will be returned to policyholders and California organizations.

"From now on, we will set our rates to generate no more than two cents in profit for every dollar in revenue," said Blue Shield Chairman and CEO Bruce Bodaken in a statement. "If at the end of any year we wind up with net income above that amount…we'll return that amount to our customers and the community."

3 distribution methods for refunds

The $180 million being refunded from 2010 health insurance premiums will be distributed through three methods:

  1. Premium credits
  2. Accountable care investments
  3. Grants to local nonprofits

Health insurance premium credits will be made in October 2011 for all individuals and businesses with fully insured coverage through Blue Shield as of May 2011. Credits will range from 10 to 30 percent of the monthly premium amount.

Individuals can expect average credits of $80 while a family of four will see a $250 average credit. Businesses offering group insurance will receive credits ranging from $110-$130 per employee, according to Blue Shield of California.

In addition to premium credits, Blue Shield of California is allocating $10 million to fund California hospitals and physician groups participating in accountable care organizations. Another $3 million will be distributed by the Blue Shield of California Foundation to local nonprofits that provide health care services.

Setting an example, CEO says

Still, Bodaken admits the move does not resolve the issue of rising health insurance rates.

"This commitment doesn't solve the affordability problem, but it does represent a paradigm shift for a health plan," he said. "We are setting an example that may challenge others to consider changes they can make to reduce the cost of coverage as well."

In announcing the pledge, the company noted that its commitment depends upon the insurer's long-term solvency. The policy will remain in effect so long as the board of directors determines the company has enough income to make the investments it needs to remain competitive.