Facing criticism for rate increases and its CEO's multimillion-dollar salary, Blue Shield of California announced plans to cap its yearly profits on Tuesday. The announcement came days after the California Assembly passed legislation that could limit health insurers' rate hikes.
In a noontime speech to San Francisco’s Commonwealth Club, Bruce Bokaden, CEO of Blue Shield of California, said that the company will limit its annual income to two percent of revenue, refunding any additional money to its members and the community. The limit is being implemented retroactively to 2010 with $180 million in excess profits being refunded. Some $167 million of that will go to policyholders, $10 million to physicians and hospitals and $3 million to the company's foundation.
“With our two percent pledge, we hope to make health care a bit more affordable for our members,” said Bokaden before a lunchtime crowd at the Commonwealth Club. “We cannot be an effective partner in the fight to make healthcare affordable if you think that we’re in it to maximize profits.”
The company made the pledge days after the California Assembly passed AB52, which would allow the state’s insurance commissioner to regulate health insurance rates, legislation which lobbyist for the health insurance industry have fiercely opposed. At the Commonwealth Club, Bokaden confirmed that Blue Shield opposes the legislation.
“The rebate is nice, but it’s actually better if people don’t get overcharged to begin with by Blue Shield or any other insurer,” Anthony Wright, executive director of Health Access, the statewide healthcare consumer advocacy coalition.
As the Bay Citizen has reported, the state’s insurance commissioner currently does have the power to deny rate increases requested by auto and life insurance companies, but has no authority to limit or halt health insurance rate hikes.
Consumer advocates welcomed Blue Shield's pledge to cap profits, but argued that the state still needs better regulation of health insurers to protect consumers, like AB52, and the rebate itself deserves scrutiny.