Blue Shield of California to Give Back $295 Million to Fulfill 2 Percent Net Income Pledge for 2011

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Oct 13, 2011, 09:00 ET

SAN FRANCISCO, Oct. 13, 2011 /PRNewswire/ -- In fulfillment of its pledge to limit net income to 2 percent of revenue, Blue Shield of California Chairman and CEO Bruce Bodaken announced today that the not-for-profit company will return approximately $295 million to its customers and the community by December 31, 2011.

Blue Shield first made its 2 percent pledge in June and announced that it would return $180 million in October to offset net income earned above the 2 percent threshold in 2010. That has been completed. Today's announcement is based on the company's estimated 2011 earnings.

"We made this pledge to help make coverage affordable for our members," said Bodaken. "Today's announcement provides more tangible evidence that we're putting affordability before profit. We hope our action will inspire others in the healthcare industry to look for ways to make quality health care more affordable."

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.

About Blue Shield of California

Blue Shield of California, an independent member of the Blue Cross Blue Shield Association, is a not-for-profit health plan with 3.3 million members, 4,800 employees, and one of the largest provider networks in California. Founded in 1939 and headquartered in San Francisco, Blue Shield of California offers a wide range of commercial and government products throughout the state. The company has contributed more than $125 million over the past four years to the Blue Shield of California Foundation — which was named one of BusinessWeek's 20 most generous corporate foundations. Contact your local agent or broker for more information about Blue Shield products and services, or visit the Blue Shield website at www.blueshieldca.com.