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Blue Shield to cap profits at 2 percent

San Francisco Chronicle, 6/7/11

Karen Chan (right) from the California Nurses Assoc. (CNA) listens to speakers protesting recent Blue Shield rate hikes, of up to 59 percent for individuals, in San Francisco Calif., on Tuesday, February 1, 2011.

Victoria Colliver, Chronicle Staff Writer
Tuesday, June 7, 2011

(06-06) 17:29 PDT SAN FRANCISCO -- Blue Shield of California today unveiled a pledge to limit its profits to 2 percent a year and give back anything over that amount to its health care providers and policyholders.

The health insurer, a San Francisco-based nonprofit, made the announcement in an opinion piece today in The Chronicle's editorial section.

Bruce Bodaken, the company's chief executive officer, vowed in the piece to limit the insurer's profits to 2 percent of revenue. Blue Shield earned $9.7 billion in revenue in 2009, an 8.8 percent increase over 2008, according to the company's website.

"If at the end of any year our net income is more than 2 percent because medical costs were lower or investment income was higher than we had projected, we'll return that amount to our members and the community," he wrote. The plan, he said, will start with last year's income because it exceeded the 2 percent mark by $180 million.

He said $167 million will be returned to policyholders, including people who by health insurance without help from their employer, and $10 million will go to physicians and hospitals participating in payment and care structures tied to quality and efficiency. The remaining 3 percent will go to its health philanthropy to support care for the poor.

Blue Shield came under intense scrutiny over the past year for proposing cumulative rate hikes of as much as 87 percent on individual policyholders. In March, amid negative publicity and pressure from state regulators, the insurer canceled its most recent planned rate hikes and promised not to raise rates for the rest of the year.

As part of today's announcement, Bodaken said Blue Shield will give customers who pay 100 percent of their premiums without help from an employer a 30 percent credit on one month's bill. Bodaken said that could amount to $80 for an individual and $250 for a family of four.

"We know that this explanation provides little comfort to those who received large increases and that the credit we're announcing today will ease the burden just slightly," Bodaken wrote in the op-ed. "But it's a good faith effort to rise to the affordability challenge with something we can do entirely on our own."

Blue Shield drew unwanted attention last month when salary documents filed for the first time with the state insurance commissioner revealed how much the insurer paid its top executives. Bodaken was the top earner, pulling in $4.6 million last year.

The insurer said compensation levels for its executives fall "well within health care industry standards, is based on performance, and relies on independent market research."

E-mail Victoria Colliver at vcolliver@sfchronicle.com

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