Los Angeles Times –
Oct. 14: Blue Shield of California says it will give customers in the state a
$283-million credit on their insurance premiums, saying it is fulfilling a
promise to return money to policyholders when its net income exceeds 2% of

The action, on top of a similar $167-million credit announced in June and
returned this month, was driven partly by the weak economy. The San Francisco
nonprofit insurer says it has spent less than expected on claims because people
have cut back on medical care.

“People are really struggling to make ends meet,” Blue Shield Chief
Executive Bruce Bodaken said in an interview Thursday. “As people have
less discretionary spending, they’re deciding that maybe they will put off that
hip or knee replacement until they can afford it.”

Individual policyholders will see their December bills credited $135 on
average, while a family of four will get a $420 average credit, reducing their
annual insurance costs by 4.5%.

Although Thursday’s action affects only nearly 2 million of Blue Shield’s
policyholders in California, other consumers could be getting similar paybacks
under President Obama’s healthcare overhaul approved last year.

Under the regulations, insurers must spend at least 80% of consumer premiums on
medical care and not reserve that income for administrative costs or profit.
That could mean rebates in the billions of dollars — which some say could
hamper efforts by some congressional Republicans to repeal the measure.

Already, people are getting free vaccinations, cancer screenings, mammograms
and colonoscopies. Adult children can remain on their parents’ insurance plans
until age 26. And policyholders no longer have to contend with limits on the
dollar value of their insurance policies.

“When people come to expect benefits and services, the law will be much
harder to cut back,” said Cathy Schoen, senior vice president of the
nonprofit Commonwealth Fund, which focuses on improving the U.S. healthcare

Opponents of the healthcare reform, however, contend that consumers can expect
higher medical bills, more costly insurance and overly regulated medical care
in coming years.

Several insurers, including California giant Anthem Blue Cross, acknowledged
that their customers are using fewer services than expected this year. But the
companies said that rebates may not be substantial — or even necessary — next
year because the cost of medical care is growing so fast.

“Medical inflation is a primary driver of healthcare costs,” said
Anthem spokeswoman Kristin Binns. “It has a significant impact on how much
of each dollar goes for medical services.”

Blue Shield said that money being returned this month comes from excess 2010
net income, while the money announced Thursday is from extra 2011 earnings.
Together, the refunds represent a 7% reduction in annual premiums this year, or
nearly an entire month’s worth of insurance cost.

“If an insurer has to give a rebate, it certainly seems like a good public
relations move to do it proactively than to be forced to do it,” said
Larry Levitt, who heads the nonprofit Kaiser Family Foundation’s Initiative on
Health Reform and Private Insurance.

Blue Shield customers said they were grateful for any break in light of
repeated rate increases over the last year, but some also questioned why they
had to in effect overpay premiums in the first place.

“If there is money due our way and the company is making right with their
accounting, I think that is to be applauded,” said John Lewis, 47, a
policyholder from Santa Barbara. “On the other hand, I wonder what is
going on that they seem unable to accurately forecast what their costs are
going to be.”

The two credits, coming within a six-month span, are “tangible evidence
that we’re putting affordability before profit,” Bodaken said. “We
hope our action will inspire others in the healthcare industry to look for ways
to make quality healthcare more affordable.”

Blue Shield’s credits came after the company was criticized by consumer groups
this year for rate hikes and Bodaken’s annual salary of $4.6 million.

California Insurance Commissioner Dave Jones called on other companies to
follow Blue Shield’s example. “Unfortunately, other health insurers and
HMOs show no indication that they intend to cap skyrocketing profits or
rates,” he said


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