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Thursday, October 27, 2011

Blue Shield refunds millions to customers

In a time when sky-high insurance premiums are the norm, Blue Shield customers have received some good news. The California-based nonprofit health insurer announced last Thursday that it will return $295 million to its customers, upholding the pledge the company made earlier this year to cap its earnings at 2 percent of its revenue. The profit cap was announced in June, and at that time, Blue Shield distributed $180 million to customers through refunds.

Chief Executive Bruce Bodaken said of the most recent distribution,

Today’s announcement provides more tangible evidence that we’re putting affordability before profit. We hope our action will inspire others in the health care industry to look for ways to make quality health care more affordable.

The refund will take place in December and will refund excess 2011 profits. A refund of $295 million means that an average family of four will be credited about $240, which they can apply to future insurance premiums.

While Blue Shield’s pledge to cap its profits is a step in the right direction, the company is one of the many nonprofit insurers that have been criticized for seeking huge premium increases while maintaining excessive reserves. And in March of this year, they withdrew an average 6.5% increase to individual health insurance premiums only after much public outrage. That would have been Blue Shield’s third increase in individual policy holders’ premiums since October of last year. This underscores that while these refunds to consumers will offset some of the health care costs that families face, states like California still need the power to stop unreasonable hikes to premiums before they go into effect. Stopping these hikes would keep insurance premiums and profits to companies lower from the start so that families can keep their money rather than eventually getting it back in a refund.

That being said, the actions by Blue Shield are an important reflection of the goals of the Affordable Care Act. The law’s “medical loss ratio” standards require that insurers spend at least 80 percent of consumers’ premiums on medical care and quality improvement efforts. These standards ensure that consumers’ dollars are not spent on excessive profits or overhead costs. The Affordable Care Act also aims for much greater transparency and accountability for insurance companies. Insurance companies must publicly justify rate increases in the individual and small group market that exceed an established threshold. For 2011, this threshold is 10 percent or more.

And across the country, like in California, the Affordable Care Act is already helping to put money back into consumers’ pockets. In New Mexico, the state insurance superintendant rejected Blue Cross Blue Shield’s plan to raise rates by 9.9%. In California, Kaiser Permanente is decreasing premiums for small businesses and providing $13.7 million credits to those who had been charged unnecessarily high premiums in the past.

With more accountability and transparency in insurance companies’ rate increases and profits, consumers will be able to ensure that their premiums go toward quality care, not insurance company profits.