Will This Health Insurer Set a New Precedent for Rate Hikes and Profit Caps?

After coming under flak in recent months from California State Insurance Commissioner Dave Jones and others, BlueShield, a group of companies that insures over 100 million Americans, has taken steps towards internal financial reform. Shield has announced that in an attempt to preserve its integrity as a non-profit company it will set an earnings cap at 2% revenue for annual net income. The insurer plans to extend the remaining surplus to customers as credit towards their premiums. Last year the company reported earnings of $315 million compared to over $10 billion in revenues.

Blue Shield CEO Bruce Bodaken is proud of the changes the coverage provider has made, saying, “It represents a paradigm shift for a health plan… We are setting an example that may challenge others to consider what changes they can make.”

Customers and policy makers hope Bodaken is right, and the move by “Shield” will pressure other non-profit insurers and for-profit competitors to lower premium health insurance rates and extend more credit to customers.