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Blue Shield of CA Announces $180M Refund, Cap on Income

Margaret Dick Tocknell, for HealthLeaders Media, June 8, 2011

Vowing to help solve the problem of rising healthcare costs, Blue Shield of California said Tuesday it will  limit its income to 2% of revenue and hand back about $180 million to policyholders, physicians, hospitals and the Blue Shield Foundation.

The pledge was made during a teleconference with Blue Shield CEO Bruce Bodaken, and Paul Markovitz, the company's executive vice president and COO.

Bodaken, whose salary was $4.6 million last year, said the company is taking the step to help "solve the seemingly intractable problem of rising healthcare costs."

Calling the cap a "paradigm shift for a health plan" Bodaken added that he hoped other health plans would follow suit.

He said the company began considering this step last summer. When the 2010 margin came in at 3.1% the company board decided to retroactively begin the program in 2010 rather than wait for the 2011 numbers. When company profits exceed 2% of revenue, Bodaken explained, a credit will be distributed each October to customers who are fully insured by Blue Shield in the previous May.

The average credit depends on monthly premiums:
  • Individual customers will be credited an average $80. For a family of four the average credit will be about $250.
  • Group customers will be credited between $110 to $130 per employee. Employers who pay part of the premium will decide whether and how to apportion the credit.
  • Small groups (2 to 50 employees) will be credited $125 per employee and about $340 for a family of four.

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