BSCA Revenue Cap Draws Mixed Reactions

Margaret Dick Tocknell, June 10, 2011

The announcement by Blue Shield of California this week that it will voluntarily limit its earnings to 2% of its revenue is garnering mixed reviews from industry analysts and consumer advocates. On Wednesday the Blues plan said it will return any excess revenue over 2% to many of its 3.3 million policyholders and providers. This year it will return about $180 million.

"Anytime an insurer voluntarily refunds money to a consumer is a good thing," stated Gerald F. Kominski, PhD, associate director of the UCLA Center for Health Plan Research in an interview with HealthLeaders Media.

Kominski isn't sure if other competitors will emulate the Blue Shield action. "If the health insurance industry worked like other big industries, then price-cutting by one major player would be followed by others in the industry. But group rates are locked in for 12 months at a time, so it isn't as if a company can immediately switch to Blue Shield."

There's no doubt, he says, that this is a great public relations move by the insurer. "I think it actually increases their bargaining position in terms of contracting with physicians and hospitals. They can say 'Look at us; we did this. We're limiting our profits and you want us to pay you more?' They can probably earn back in contracting what this costs them."

Margaret Dick Tocknell Margaret Dick Tocknell is a reporter/editor with HealthLeaders Media.
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