Blue Shield of California
COVID-19 Resource Center for Employers, Plan Sponsors, Brokers and Consultants

B2B General

June 01, 2020 - 2 min read

Blue Shield’s 2% pledge sets us apart

Many health plans announced their first quarter earnings statement this month, prompting speculation regarding rates and rebates ahead. Unlike these carriers, Blue Shield of California is a not-for-profit healthcare company and does not answer to shareholders who, by design, define acceptable profit margins for their company. We are a mission-driven organization with a purpose greater than profits, and our focus in the face of COVID-19 is to ensure we are adequately resourced to deliver high-value, high-quality care and stay the course of our mission.

In 2011, our company made an unwavering commitment to place a voluntary 2% cap on our net income from revenue to serve those in greater need. The actions we take when our net income exceeds that amount is business-as-usual for us, setting us apart from many of our competitors. Our financial planning targets that 2% margin. If we do exceed this target, the additional amount is used to fund programs and services actively improving lives in our underserved communities. Just last month, Blue Shield of California Foundation provided grants to communities hit hardest by COVID-19.

The pandemic has played a decisive role in the administrative costs of healthcare insurers while treatments and procedures unrelated to coronavirus have been delayed. We expect to see an increase in health benefits utilization as the COVID-19 health crises abates, but there are a wide range of forecasts for how and when that will materialize.

Along with our 2% pledge, Medical Loss Ratio (MLR) provisions of the Affordable Care Act help ensure that customers’ rates reflect actual medical costs. MLR stipulates the maximum percentage of premiums that insurers can spend on administrative costs, ensuring a majority of revenues are spent on medical care and healthcare quality improvement. (Prior to the ACA, health insurers could set their own guidelines.) For large business customers, healthcare insurers are required to spend 85% of premiums on medical claims and quality. That number shifts to 80% for the small business market.

We will continue looking closely at utilization rates and conduct standard quarterly assessments in the months ahead. While rates are determined in advance, based on projections for the future rather than what’s occurred in the previous quarter, trends do emerge. Utilization rates could spike or drop in unexpected ways, not to mention the uncertain future trajectory of the coronavirus. All these factors have the potential to impact hospitalization rates, testing, and treatment costs.

We carefully consider rate impacts for our customers at all times and this couldn’t possibly be any truer than right now. We thank you for being a valued customer and supporting our mission to deliver health care worthy of our family and friends that’s sustainably affordable.

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Learn more about our mission-driven organization and 2% pledge in our currently available 2018 Mission Report. Look for our 2019 Mission Report coming soon.

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