In a completely unexpected move, Blue Shield of California has decided to make some changes. They are going to take the $180 million in excess profit, and pay it back to their customers. This will benefit individuals, families, and businesses. There may be more money credited back to customers in the future, as well.
Blue Shield of California has created a new rule about what it is going to do with the money it makes in profit. This new rule limits the insurance company’s annual income to 2% of the money that it takes in. Everything beyond that amount is going to be returned to consumers. Blue Shield is going to apply this rule retroactively to 2010. In 2010, the insurance company made $315 million in profit, and $10 billion in revenue.
Earlier this year, as you may remember, Blue Shield threatened to raise the rates of some of its premiums by 59%. The insurer insisted that it needed the rate hike, in order to continue to make a profit. This, of course, was criticized by consumers as well as insurance regulators.
After much public outcry, the insurance company decided not to go ahead with the huge rate hike. Then, recently, it was revealed that Blue Shield paid its CEO $46 million in salary last year. Together, these types of decisions did not make the insurance company look good.
Customers of Blue Shield who are individual policyholders, and customers who are covered by the insurance company’s small and large group health insurance plans are going to be getting some money back this year. It is rare for insurance companies to give money back to customers.
If you are an individual customer, then you will get a 30% premium credit. People who have a health insurance policy from Blue Shield that covers only themselves will get around $80.00 credited back to them. If your health insurance covers a family of four, then you will get a credit of around $250.00 back.
Small businesses that have less than 50 employees will also be getting some money credited back, too. They will get $125.00 for an individual employee that was covered by Blue Shield health insurance, and around $340.00 for a family of four that was covered. The employers will have to decide for themselves how to distribute this credit to its employees.
This does not mean that people should expect to see a check in their mailbox, that they can take to their bank, and deposit. The money Blue Shield is paying customers will come in the form of a credit on their October 2011 bills. The insurance company has promised to give out credits again if they end up with a net income that is over the 2% cap.
Image by Gabriel Porras by Flickr