Behind BSCA's 2% Solution
But the remaining 15% to 20% of the premium represents the insurer's own production – its value added – for things like marketing, claims processing, managing care, negotiating prices, etc. According to Reinhardt, even with a margin of 2% Blue Shield can still get a 10% to 15% return on the value added. "That's a very handsome return."
Okay, so maybe Blue Shield isn't taking a huge gamble with this step, but I still don't understand how holding profits to a 2% margin and refunding $80 to $340 once a year to some health plan members helps hold down costs.
It doesn't, Reinhardt says . "It does virtually nothing to control costs, which are driven by what hospitals do and what they charge for it, and ditto for MDs and drug companies. It's a good PR move."
Blue Shield could use some good PR right now. There's certainly no love lost between the California Department of Insurance and Blue Shield; the two have been fighting about rate increases for years. Dave Jones, head of the DOI, even termed Blue Shield's announcements as "essentially an admission by the insurer that it is…making excessive profits."
- Primary Care Docs Average More Hospital Revenue Than Specialists
- 69% of Employers Plan to Offer Healthcare Coverage After 2014
- How Chargemaster Data May Affect Hospital Revenue
- Q&A: Catholic Health Initiatives' New Senior VP for Capital Finance
- Building a Better Healthcare Board
- ED Physicians Key to Half of Hospital Admissions
- Hospital Pricing Irks Nurses; More Jobs, Less Pay
- Insurer's App Aims to Lower Healthcare Costs, Securely
- CMS Seeks to 'Rapidly Reduce' Medicare Spending with $1B in Grants
- Quiet ORs Better for Patient Safety