Nov
11Blue Shield of California has announced plans to return $295 million to policyholders and others during December as part of its pledge to limit its net income to 2 percent of revenues.
The refunds are the result of a Blue Shield policy change that grew out of a controversy at the beginning of the year. At the time, media reports stated the insurer planned three rate hikes that would increase premiums for some health insurance plans by as much as 59 percent.
The reaction was fast and furious. California Insurance Commissioner Dave Jones called the increase “stunning,” while U.S. Health and Human Services Secretary Kathleen Sebelius pledged her department’s assistance in reviewing the matter.
While Blue Shield stood by the increases, saying an independent auditor found them to be financially sound, the medical insurance company announced in June it would limit its net income to 2 percent of its revenues.
In October, the insurer returned $180 million to offset income earned in 2010 above the 2 percent threshold. Now, Blue Shield is preparing to return another $295 million based upon its estimated 2011 earnings.
The $295 million will be returned largely as premium credits for policyholders who were fully insured and had continuous health insurance coverage through Blue Shield of California from Aug. 1, 2011, to at least Dec. 1, 2011. The credit will equal 54 percent of one month’s premium on eligible policies. Both individual and fully insured group customers should receive the credit.
While the actual credit amount will vary depending on the policy, Blue Shield estimates average credits at the following levels:
- Individuals: $135
- Family of four: $420
- Mid/large groups: $195-$230 per member
- Small groups: $220 per employee, or $605 for a family of four
Blue Shield of California also says it will give $10 million to California hospital and physician groups as well as $2 million to a community investment program. In response to the news, Jones applauded Blue Shield of California but cautioned that other medical insurance companies are not following suit.
“This voluntary action to cap profits, which Blue Shield of California announced earlier this year, is welcome news,” Jones said in a press statement. “Unfortunately, other health insurers and HMOs show no indication that they intend to cap skyrocketing profits or rates.”
According to Jones, the five largest health insurance companies made a combined profit of $11.7 billion in 2010. That figure represents a 17 percent increase over 2009 profits and a 51 percent increase over 2008 profits. Jones advocates the passage of legislation that would allow his office the ability to reject medical insurance premiums hikes deemed excessive.
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