PROFIT CAP MEANS CREDITS FOR CUSTOMERS

Customers of Blue Shield of California will see their December premiums reduced substantially — the result of the insurer's pledge to cap profits at 2 percent of revenue.

The giant insurer said Thursday that it would return about $283 million to individual and group customers in credits against their premiums. Customers will receive the credits in their December bills.

Blue Shield said the credit will be about $420 for the average family of four and $135 for an individual subscriber.

Fully insured businesses of 51 employees or more will receive credits of up to $230 per member, while the average is $220 for an employee of a small business.

In addition, Blue Shield will make about $10 million in grants to California hospitals and physician groups, and use $2 million for what officials called a "future community investment."

It's the second time Blue Shield has issued customer credits since announcing in June that it would limit profits, a move that came after the insurer was criticized for proposing hefty premium increases. The first rebate totaled $180 million — the amount by which officials said the insurer exceeded its 2 percent goal for 2010.

Bruce Bodaken, Blue Shield's chief executive officer, said the rebates demonstrate the company is "putting affordability before profit."

State Insurance Commissioner Dave Jones — who frequently spars with the industry — said he welcomed the news.

But he leveled criticism at other health plans for not taking similar action. They "show no indication that they intend to cap skyrocketing profits or rates," he said.

Jones and other critics of the health insurance industry used the announcement to reiterate their support for legislation that would give the state the ability to accept or reject premium increases.

"To demonstrate itself as a serious partner in reforming the health care system, Blue Shield should agree to submit to oversight," said Doug Heller, executive director of Consumer Watchdog.

Health industry leaders say greater state oversight is not necessary, particularly given a requirement in the federal health care law that requires insurers to spend 80 percent of their premium dollars on caring for patients.

Patrick Johnston, president of the California Association of Health Plans, said industry profit margins are about 3 percent to 5 percent, an amount he said is needed to offer more services to more people.

Contatct The Bee's Darrell Smith, (916) 321-1040 or [email protected].