Insurance Company Promises to Refund Excessive Profits to Customers

In an Op-ed published on Tuesday, Bruce Bodaken, CEO of the non-profit insurer Blue Shield of California, announced that Blue Shield will be instituting a limit on annual profits. Starting retroactively in 2010, if profits exceed 2% of revenue the difference will be paid back to customers and doctors. In 2010 Blue Shield exceeded this limit by $180 million and their customers will see a onetime premium reduction in October of this year equal to a total of $167 million dollars. The remaining money will be paid out to doctors that are working to lower costs by forming accountable care organizations (which we’ve discussed before on this blog).

This announcement is welcome news after recent reports that insurance companies are enjoying record profits while the rest of the economy is mired in recession. Blue Shield, in particular, has come under increased scrutiny after announcing big premium increases for 2011 and revealing that CEO Bodaken’s compensation in 2010 was over 4 times larger than chief executives at his largest for-profit rivals.

This announcement also comes right on the heels of the passage of AB 52 in the California Assembly, a bill which would empower the state’s insurance commissioner to reject or modify premium increase deemed excessive. This bill is important because, while Blue Shield’s non-profit status allows it to limit its profits without fearing investors, customers of for-profit insurance companies shouldn’t expect their insurers to voluntarily follow Blue Shield’s lead.

-- San Francisco Chronicle / CWA Health Care News / CWA Health Care News / CWA Health Care News / LA Times / LA Times