CommunityMy FDL

Blue Shield admits to overcharging California customers by about half a billion since 2010

Photobucket

It is a masterful spin by the self-described not-for-profit Blue Shield of California to announce that it is returning all but two percent of its profits to its customers, as though this were some act of humble generosity. It’s a little like a supermarket announcing that from now on it’s going to give back (almost) all of your change. (It’s actually worse than that, as I’ll explain.)

All told, Blue Shield will have returned about $475 million in profits – $283 million that Blue Shield is crediting back in December plus about $167 million credited back earlier in the year for 2010 premiums as well as the $25 million the company distributed to doctors, hospitals and an as yet unnamed “community investment.” But this should not be thought of as a sincere gift from a community-oriented nonprofit. Rather, it’s nearly half a billion dollars that Blue Shield overcharged its policyholders and then held onto for months.

Worse still, Blue Shield had to be pushed and prodded to do anything; this refund didn’t just happen. Blue Shield is only giving some money back because there was huge public pressure this year – from California Insurance Commissioner Dave Jones, from nurses and consumers who protested at their corporate offices, from lawmakers like Assemblyman Mike Feuer carrying legislation to regulate insurance companies and from news reporters investigating their rates and salaries.

What’s more, the $283 million that will go to reducing policyholders’ December premium payments is utter chump change when given a full context:

Blue Shield, according to documents it files with the state of California, has more than $3 billion in excess surplus (“Tangible Net Equity excess” is the formal term). That massive and ever growing pot of money is a profit account that Blue Shield uses to take policyholder premium out of the healthcare system so they can come back and charge those same policyholders high rates again next year. Blue Shield could give back $280 million a month for an entire year and still have a enough money on hand to run a stable insurance company. Or, to think of it a little differently, instead of giving families back a few hundred dollars for Christmas, they could just sell insurance at a sell insurance at a reasonable premium and not stuff their own stockings with surplus.

To be sure, Blue Shield is angling for a feel good story it can tell politicians and voters when they next consider whether to enact a law or initiative regulating the premiums health insurance companies can charge. That story may work with some politicians in Sacramento, but I doubt voters who are stuck overpaying for health insurance will be so easily spun.
———-
Doug Heller is the Executive Director of Consumer Watchdog. Visit our website at: www.ConsumerWatchdog.org.

Previous post

Occupy Freshkills

Next post

Watercooler: A Momentary Grasp Of Reason

Consumer Watchdog

Consumer Watchdog

Consumer Watchdog is a nonprofit organization dedicated to providing an effective voice for taxpayers and consumers in an era when special interests dominate public discourse, government and politics. We deploy an in-house team of public interest lawyers, policy experts, strategists, and grassroots activists to expose, confront, and change injustice every day, saving Americans billions of dollars and improving countless lives.

5 Comments