We've reported before on how health insurance company Blue Shield of California was met with opposition over its rate increases. So, it's only fair we report that, yesterday, the company said it would cap its income and return $180 million to its customers.
The new rule limits its annual income to 2% of revenue and requires any profit in excess of that to be returned to customers and the community.
The rule is being implemented retroactively to 2010 when the insurer earned $315 million in profit and $10 billion in revenue.
The company had come under attack earlier this year after it said it planned to raise some of its premiums by 59%. But now, with the new rule in effect, policyholders have some real money coming back to them.
The Los Angeles Times reports that most customers will see their October bill cut by a third, which works out to a 2.5 percent reduction over the whole year. An individual policy holder will get back about $80 and a family of four should get back about $250.
"Our pledge today tangibly demonstrates that Blue Shield puts affordability before profit... This commitment doesn't solve the affordability problem, but it does represent a paradigm shift for a health plan. We are setting an example that may challenge others to consider changes they can make to reduce the cost of coverage, as well," said Blue Shield's Chairman and CEO Bruce Bodaken in a statement.
The Times reports on what one critic had to say:
Insurance Commissioner Dave Jones seized on Blue Shield's initiative to make his case for a bill in the Legislature that would give state insurance regulators authority to revise or reject excessive rate increases.
"Their announcement is an admission that they are making excessive profits," Jones said. "It's just another example of how in California we are at the mercy of insurance companies."