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Life Health > Health Insurance > Health Insurance

Former Insurance Exec Eyes Profit Cap Pledge

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Wendell Potter, a former health insurance company public relations manager who is now a harsh critic of health insurers, says he has questions about a health insurer’s promise to limit the amount of net income it keeps.

Potter, an analyst at the Center for Public Integrity, has written a commentary about a new, voluntary move by Blue Shield of California, San Francisco, to send rebates to customers if net income exceeds 2% of revenue.

California Blue Shield Bruce Bodaken announced the voluntary 2% profit cap Tuesday in San Francisco.

Bodaken said applying the cap to 2010 results will result in the company paying about $180 million to customers, provider groups and nonprofit groups.

“While I’m happy for the policyholders who might get a few bucks back from their insurer, the timing of the Blue Shield campaign is, to me at least, a tad suspicious,” Potter says in his commentary.

Potter notes that the California Legislature is considering a bill that would give the insurance commissioner the authority to reject proposed health insurance rate increases that are found to be unreasonable.

Recently, the executive compensation disclosure forms now required by the federal Patient Protection and Affordable Care Act of 2010 (PPACA) showed that Bodaken earned $4.6 million in 2010, or about 4 times as much as the executive in charge of the California arm of WellPoint Inc., Indianapolis (NYSE:WLP), Potter says.

California Blue Shield has about 3.5 million enrollees; WellPoint has about twice as many California enrollees, Potter says.

California Blue Shield has about $3 billion in reserves, and it has a risk-based capital (RBC) ratio of 1,512%, which is about 3 times the average RBC ratio for big for-profit plans, Potter says.

That high RBC ratio means California Blue Shield could pay back more to customers than it is offering to pay out in connection with the voluntary profit cap, Potter says.

- Allison Bell

Other California Blue Shield coverage from National Underwriter Life & Health:


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