An Answer For Blue Shield: Limit Premiums, Not Profits

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Blue Shield's CEO Bruce Bodaken tried to quell recent outrage over his company's proposed premium hikes and his $4.6 million pay day by announcing a 2% profit cap on the op-ed page of San Francisco Chronicle Tuesday. The move was designed to convince Sacramento not to approve tough health insurnace premium regulation. This morning we answered back on the Chronicle's op-ed page with the column below pulling the curtain back on Blue Shield's real strategy. All Sacramento needs to do is follow the money to understand what Bodaken is up to.


Limit insurance premiums, not profits

The CEO of Blue Shield of California announced in the Tuesday Open Forum that because of these trying times he was willing to limit his company's profits to 2 percent. For a not-for-profit health insurance company like Blue Shield, which has more than $3.6 billion in reserves, that's 2 percent too much.

The real intent of CEO Bruce Bodaken's announcement was to show the company is no longer the poster child for fast-moving legislation that would require every health insurance company in California to request permission from the elected insurance commissioner before raising rates.

Assembly Bill 52 has passed the California Assembly and is poised for a run through the state Senate after politicians took note of nonprofit Blue Shield's recent pork fests at its policyholders' trough.

Earlier in the year, Blue Shield tried to raise premiums as much as 86 percent on some Californians. Nurses and patients protested at Blue Shield's offices and the company announced it would freeze the increase for 60 days. Later, Blue Shield bowed to California Insurance Commissioner Dave Jones's request that the increase be delayed until 2012.

Two weeks ago, Californians learned for the first time that Bodaken was paid $4.6 million in 2010. Documents made public by the California Department of Insurance also revealed that Blue Shield paid its top 10 executives more than $14 million combined last year.

In January, after Blue Shield announced its third major premium increase in less than a year, my organization sent a letter to Bodaken demanding that he disclose his annual salary. But Blue Shield only made the disclosure after new regulations by the insurance commissioner required the company to do so.

The problem is, while he may be able to expose insurance company secrets, Commissioner Jones does not have the power to reject health insurance premium increases. Shame, guilt and protests can only pressure Blue Shield and other insurance companies on occasion.

Home and auto insurance companies have to ask permission from the state before raising premiums, but not health insurance companies. AB52 would authorize regulators to deny health insurance company rate increases on the basis of excessive administrative and overhead costs, including executive salaries. That's why Blue Shield and other insurance companies have been aggressively opposing the legislation. Blue Shield's $3.6 billion in reserves is 12 times the state's requirement.

Bodaken's announcement is a last-ditch attempt to discourage legislators from giving the state insurance commissioner "prior approval" authority, which would allow the commissioner to stop proposed rate increases in the individual and group markets.

So why are Blue Shield and the rest of the state's health insurance companies so vehemently against AB52? It's all about control. Insurance companies want to be able to raise premiums at will. In a country where health insurance will be mandatory by 2014, that's just not right.

If the government requires us to buy health insurance, an idea Bodaken was one of the first to hatch on these pages nine years ago, the government needs to guarantee that premiums are affordable. More than half of states already have "prior approval" authority for health insurance premiums. California needs to catch up.

When Bodaken announces he is willing to submit the premiums he charges to regulatory review, that's when he will have taken a true step forward as a pioneering CEO.

Jamie Court is president of Consumer Watchdog and author of "The Progressive's Guide to Raising Hell: How to Win Grassroots Campaigns, Pass Ballot Box Laws & Get the Change We Voted For" (Chelsea Green, 2010).


Jamie Court
Jamie Court
Consumer Watchdog's President and Chairman of the Board is an award-winning and nationally recognized consumer advocate. The author of three books, he has led dozens of campaigns to reform insurance companies, financial institutions, energy companies, political accountability and health care companies.

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