Blue Shield Will Cap Profits
Commentary by Bruce Bodaken, San Francisco Chronicle, June 7, 2011
We are living in incredibly challenging economic times. At Blue Shield of California, we believe we have an obligation to tighten our budget, just like everyone else.
That's why we are announcing a new commitment to help our customers get
the health care they need at a price they can better afford. We don't have absolute power to control rising health care costs, but there are some things we can do to help people pay for it. Here is our pledge:
First, we will limit profits for our company. Specifically, we will cap
our net income at 2 percent of revenue. If at the end of any year our net income is more than 2 percent because medical costs were lower or
investment income was higher than we had projected, we'll return that
amount to our members and the community. This is a long-term commitment
and, we believe, the first of its kind in the country. We are committed to the 2 percent pledge so long as our board of directors determines that Blue Shield remains financially solvent, with sufficient funds to make the investments needed to stay competitive.
Second, we will apply this new policy beginning with our income in 2010, the year health reform was enacted. Our net income last year exceeded the 2 percent target by $180 million. As a result, we will give back $180 million this year: $167 million to our policyholders; $10 million to physicians and hospitals that invest in new ways to coordinate care through accountable care organizations; and $3 million to the Blue Shield of California Foundation to support the safety net.
Third, we will put first our customers who need help the most. Last year, we unfortunately had to raise premiums to keep up with the rising cost of hospitals, physicians and prescription drugs, particularly for our individual and family plan members. Those customers, who pay 100 percent of their premiums without help from an employer, will receive a 30 percent credit on one month's bill - an average of about $80 for an individual and $250 for a family of four.
So that is our plan: We will limit our margins, provide credits to our
customers, invest in the community and continue to look for ways to help individuals keep and afford their health care. We know that this
explanation provides little comfort to those who received large increases. But it's a good faith effort to rise to the affordability challenge.
While we are taking this action to help our customers pay for their health care coverage, we know that this is not enough. We have long advocated for health care reform to expand coverage, reduce costs and improve quality. We have developed innovative programs to restrain the rising cost of medical care, but we can't make a major dent in rising health care costs
on our own.
That's because making coverage affordable is not something any company can do by itself. We all need to take better care of ourselves. Insurers, hospitals, drug companies, physicians and government must look inward, think creatively and take bold action to reduce costs. That's what we're doing - and we invite others to join us.
The commitment we are announcing today is not a cure-all. But it is a
prescription for more access, better health care and greater
affordability. Regulate health care insurance premiums?
AB52, which would give California regulators the power to reject or modify excessive health insurance premium increases, passed out of the Assembly on Friday with no Republican support and now moves to the state Senate.
To learn more, go to sfg.ly/kW48Qq. Bruce Bodaken is the chairman and CEO of Blue Shield of California.
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