Blue Shield of California, a nonprofit health insurer, says it will try to limit its annual net income to 2% of revenue.
California Blue Shield, San Francisco, will make that move retroactive to 2010, meaning that the company could send about $180 million to the company’s customers and to California communities, according to California Blue Shield Chairman Bruce Bodaken.
California Blue Shield will give $167 million to fully insured individual and group customers and $3 million in the form of grants to nonprofit health care organizations.
California Blue Shield also will invest $10 million in California hospitals and physician groups, the company says.
The average individual customer will get a credit of about $80, and the average small group will get about $125 for one employee and about $340 for a family of four, the company says.
Bodaken spoke as activists in many states are using large health insurers’ healthy margins as a reason to oppose changes in efforts to implement the Patient Protection and Affordable Care Act of 2010 (PPACA).
A PPACA minimum medical loss ratio (MLR) requires carriers to spend 85% of large group revenue and 80% of individual and small group revenue on health care or quality improvement efforts.
Another PPACA provision will require regulators to review any efforts to increase health coverage rates more than 10%.
California Blue Shield has been a strong supporter of efforts to expand access to health coverage and to make PPACA worth, rather than efforts to block implementation of the legislation.
“We know now that expanding access to coverage is not enough,” Bodaken said during a speech earlier this week in San Francisco, according to a copy of his remarks provided by California Blue Shield. “Even
with the passage of federal health reform, coverage will be denied to far too many. Only if we solve the seemingly intractable problem of rising health care costs will the dream of universal coverage truly be achieved…. Our pledge today tangibly demonstrates that Blue Shield puts affordability before profit.”
California Blue Shield hopes other carriers will follow its example, Bodaken said.
California Blue Shield will stick with the 2% pledge “as long as the company’s board of directors determines that Blue Shield remains financially solvent, with sufficient funds to make the investments needed to stay competitive,” the company says.
California Blue Shield is separate from the company that holds the Blue Cross license for California. It provides or administers health coverage for about 3.3 million people.
U.S. Health and Human Services Secretary Kathleen Sebelius welcomed California Blue Shield’s voluntary 2% profit cap pledge but argued that the kinds of rigorous state reviews of insurance rate increases required by PPACA are also important.