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Home » Santa Clarita News » Blue Shield Credits Back Excess Payments To Customers

Blue Shield Credits Back Excess Payments To Customers

blue_shieldBlue Shield of California has announced it will give its customers $295 million in credit in order to fulfill its 2 percent net income pledge.

Blue Shield, a not-for-profit company, says that based on the company’s estimated 2011 earnings they will return excess to its customers and the community by December 31.

“We made this pledge to help make coverage affordable for our members,” said Blue Shield CEO Bruce Bodaken. “We hope our action will inspire others in the healthcare industry to look for ways to make quality health care more affordable.”

Blue Shield admits one reason for the excess profit is their customer’s reduced use of health care services.


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“We have seen there have been lower numbers of hospitalizations. Lower than what we anticipated for the year so that was certainly one contributing factor to why our margin exceeds 2%,” Steve Shivinsky, Blue Shield, VP Corporate Communications.

However they say they’ve been doing a number of other things to reduce the overall cost of health care while improving quality.

“We’ve had some success in Sacramento for example with CalPERs in reducing their overall cost of care,” said Shivinsky.

Blue Shield’s customer credit does not exactly stem from the health reform law passed by Congress and President Barack Obama.

“Well, insofar as the Accountable Care Act has the goal of universal coverage and providing affordable care to all Americans, our 2% pledge certainly supports that goal in that we as a company have a mission of providing quality care at an affordable price,” Shivinsky said.

The real benefit to this section of health care reform, officially known as the Affordable Care Act, may not be seen until the profit calculations for 2011 are applied under the Federal Medical Loss Ratio Rebate.

“Medical Loss Ratio is if we’re not spending at least 80% of our premium dollars on care we have to return the difference to our customers, our members,” said Shivinsky.

How the $295 million will be paid

  • PREMIUM CREDITS – Blue Shield’s individual and fully insured group customers will each get a 54 percent credit against one month of premium. Customers with whom Blue Shield shares risk will each get an 18 percent credit against one month of premium. The company will credit about $283 million back to its individual and group business customers, bringing the two-year total credits to approximately $450 million.

How this translates into actual dollars for policyholders

All eligible customers with fully insured continuous coverage from August 1 through at least December 1, 2011 will receive a credit in the bill for their December 2011 premiums. The average credit will vary depending on the monthly premiums:

  • The average individual customer will be credited approximately $135 and an average family of four will be credited approximately $420. The range is roughly $40 – $270 for individuals and $220 – $700 for a family of four.
  • For all fully insured mid/large group customers (51 employees and above), the average credit to the group will be $195 – $230 per member. Employers who pay part of the premium must decide whether and how to apportion it.
  • For small groups (2-50 employees), the averages are $220 for one employee and approximately $605 for a family of four.
  • Self-funded groups are not eligible for the credit. Nor are persons covered under certain federal and state government contracts that don’t provide a way to give credits.
  • INVESTMENTS IN ACCOUNTABLE CARE – Blue Shield will provide approximately $10 million in funding to California hospitals and physician groups to help them participate more effectively in accountable care organizations (ACOs). The company received overwhelming interest from providers after announcing last June that it would make $10 million in ACO grants for FY 2010. Today’s announcement brings the two-year grant total to about $20 million. Blue Shield will announce the grantees on October 17.
  • Blue Shield will give back $2 million for a future community investment that is under evaluation.

Blue Shield Credits Back Excess Payments To Customers

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