Calif. health insurer to refund millions, cap profits

Blue Shield of California’s surprise announcement Tuesday that it will cap profits at 2 percent and issue millions in policyholder refunds sparked hopes that other health insurers will follow suit. But many experts said that is unlikely.

The company is better positioned than most to make that move. For one thing, as a nonprofit company, it has more leeway to cap profits than its for-profit cousins, which have to meet Wall Street earnings targets, says Peter Kongstvedt, a managed-care consultant in McLean.

The insurer, a major force in the California market with more than 3 million policyholders, has substantial reserves and posted a profit margin of 3.1 percent last year, including income derived from its investments.

That’s more than the 2 to 3 percent margin typical for nonprofit insurers, says Uwe Reinhardt, a health economist at Princeton University.

“It’s an unbelievably good public relations measure,” Reinhardt said of the company’s decision, which includes refunding $167 million to policyholders.

Although most insurers will not embrace such an overt cap on profits, some nonprofit insurers may try to “step up and match these rebates” as a way to improve their public image and attract new business, said Sheryl Skolnick, a financial analyst for CRT Capital Group in Stamford, Conn.

Two of the larger nonprofit insurers that operate in Virginia, Maryland and the District — CareFirst BlueCross BlueShield and Kaiser Permanente — declined to comment. Robert Zirkelbach, a spokesman for the industry trade group America’s Health Insurance Plans, said insurers are “doing everything they can to keep coverage affordable,” but he did not speculate on whether others would join Blue Shield.

The announcement by Blue Shield comes as insurers nationwide are enjoying healthy profits, fueled in part by lower-than-expected use of medical services last year, as recession-stung consumers held off on seeking care.

At the same time, new rules are going into effect that put insurers’ profits and spending under closer scrutiny. The federal health-care overhaul requires insurers to spend at least 80 percent of their revenue on medical care, leaving 20 percent for administrative costs, including profits. Insurers that don’t meet that target must issue rebates to policyholders as of next year.

Baltimore Grand Prix Partners with CareFirst Blue Cross BlueShield ...

Posted on Wednesday, May 25th, 2011 at 8:58 am

The Baltimore Grand Prix and CareFirst BlueCross Blue Shield have partnered to the CareFirst BlueCross BlueShield 5K Run on Friday, September 2, 2011. The 5K run will take place on the 2.0 mile Baltimore Gran Prix street circuit course traveling through the streets of downtown Baltimore right after the race cars have left the track.

“This is going to be another fabulous family opportunity at the inaugural Baltimore Grand Prix,” said Jay Davidson, CEO and President of the Baltimore Grand Prix. “What a great way for people to get right into the heart of the action as they make their way around the race course that the IZOD IndyCar and American Le Mans Series presented by Tequila Patron cars have just been racing around at 180 mph.”

CareFirst BlueCross BlueShield is the largest health care insurer in the Mid-Atlantic region serving nearly 3.4 million members and employs more than 5,200 associates in the District of Columbia, Maryland, Northern Virginia, North Carolina and West Virginia.  “We’re excited to be a partner of the Baltimore Grand Prix in its inaugural year and are honored to host the CareFirst BlueCross BlueShield 5K race,” said John Kastner, Vice President, Corp. Marketing Communications for CareFirst.  “It’s important for us at CareFirst to not only provide quality health care benefits to our members, but to be an active participant in the communities that we serve.  Especially when we have an opportunity to sponsor events that focus on health and wellness which is so important to us as a company and a health care plan – making the Baltimore Grand Prix and CareFirst BlueCross BlueShield 5K race a great partnership.”

The CareFirst BlueCross BlueShield 5K is open to all ages and ability levels.  The CareFirst BlueCross BlueShield 5K will be staged and managed by Corrigan Sports Enterprises (CSE).   Based in Baltimore, CSE develops and implements events throughout the entire country with a focus on the Mid-Atlantic Region. CSE’s signature event, The Under Armour Baltimore Marathon just celebrated its 10th anniversary with over 22,000 runners.  “We’re excited to partner with the Baltimore Grand Prix team and CareFirst,” said Lee Corrigan, President of CSE.  “At Corrigan Sports we pride ourselves on providing runners across the country with a unique experience.  Running on an actual grand prix course definitely meets that requirement.

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