Wednesday, June 08, 2011

California Insurer Says It Will Cap Earnings

Blue Shield of California, a large nonprofit health insurer that has come under sharp criticism in recent months for its double-digit rate increases, said on Tuesday that it planned to cap its earning and refund the bulk of any excess income to its policyholders.

The insurer said it would limit its profit to no more than 2 percent of its revenue and said it already planned to return $180 million, the profit the company says it made above its 2010 target.

“With our 2 percent pledge, we hope to make coverage a bit more affordable for our members,” Bruce Bodaken, Blue Shield’s chairman and chief executive, said in a speech at the Commonwealth Club in San Francisco. “But more important, we want to demonstrate that health care affordability, which is the key to universal coverage, is Blue Shield’s top priority.”

In a telephone interview, Mr. Bodaken said: “It’s one further step in a long series of steps in which we believe that we and others all need to step up and reduce the cost of health care.”

While it is unclear whether other insurers will make similar pledges, the federal health care law is aimed at making sure insurers are not able to set their premiums too much above their costs. Some experts expect other insurers to take similar actions as the law goes into effect.

“This would be the logical next step,” said Timothy S. Jost, a law professor at Washington and Lee University, who said some insurers have already started considering similar refunds. Last September, for example, Blue Cross and Blue Shield of North Carolina said it planned to refund $156 million to policyholders.
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