Cap earnings? What are they, commies?

Rico says that Reed Abelson has an article in The New York Times about an insurance company voluntarily giving up some profits:

Blue Shield of California, a large nonprofit health insurer that has come under sharp criticism in recent months for its double-digit rate increases, said that it planned to cap its earning and refund the bulk of any excess income to its policyholders. The insurer said it would limit its profit to no more than two percent of its revenue and said it already planned to return $180 million, the profit the company says it made above its 2010 target.
“With our two percent pledge, we hope to make coverage a bit more affordable for our members,” Bruce Bodaken, Blue Shield’s chairman and chief executive, said in a speech at the Commonwealth Club in San Francisco. “But more important, we want to demonstrate that health care affordability, which is the key to universal coverage, is Blue Shield’s top priority.” In a telephone interview, Mr. Bodaken said: “It’s one further step in a long series of steps in which we believe that we and others all need to step up and reduce the cost of health care.”
While it is unclear whether other insurers will make similar pledges, the federal health care law is aimed at making sure insurers are not able to set their premiums too much above their costs. Some experts expect other insurers to take similar actions as the law goes into effect. “This would be the logical next step,” said Timothy S. Jost, a law professor at Washington and Lee University, who said some insurers have already started considering similar refunds. Last September, for example, Blue Cross and Blue Shield of North Carolina said it planned to refund $156 million to policyholders.
Blue Shield of California said it would refund $167 million to policyholders, typically giving them a thirty percent credit toward one month’s premiums. A family of four, for example, may receive $250 toward the cost of a policy. Hospitals and doctors that participate in programs aimed at better coordinating care for patients will receive $10 million, and the insurer’s foundation will receive $3 million.
As a nonprofit, the insurer does not generate returns for investors, but uses any money it earns to further its mission.
An early proponent of many of the changes in the federal health care law, Blue Shield has been the target of public outcry. Like many nonprofit insurers, Blue Shield has been criticized for seeking large premium increases and for maintaining overly generous reserves. Federal and state regulators are increasingly scrutinizing the rate requests of all insurers because of the federal health care law, and medical costs have been lower than many companies had anticipated, leading to substantial profits.
Mr. Bodaken said the decision to limit profits was made well before state insurance regulators raised concerns about its rate increases. Earlier this year, Blue Shield bowed to pressure from regulators and consumer groups and dropped a request for higher rates. “It really has nothing to do with our rate increases,” he said.
California lawmakers are considering legislation that would give state regulators the authority to approve insurers’ rate requests before they go into effect. Federal and state officials emphasized that Blue Shield’s actions did not diminish the need for strong regulatory oversight.
Kathleen Sebelius, the secretary of health and human services, said in a statement: “While such voluntary efforts are great for Blue Shield’s policyholders in California, today’s announcement also reinforces the importance of the Affordable Care Act and rigorous state review of insurance rates.”
California’s state insurance commissioner, Dave Jones, who has pushed for state legislation that would allow him to block excessive rate increases, said Blue Shield’s action demonstrated the need for the law. “The announcement is an admission by an insurer, in this case a nonprofit insurer, that they are making excessive profits,” he said. The insurer’s profits about doubled from 2009 to 2010 and he said its $3.5 billion in reserves were higher than regulations require.
Consumer advocates also emphasized that Blue Shield’s pledge did not change the need for regulators to make sure insurers were not charging people too much. “Certainly, there are some consumers who will be getting rebates who will welcome the news,” said Anthony Wright, executive director of Health Access California, a state advocacy group. Still, he said, “consumers should not be overcharged on the front end.” Given the recent outcry over its high rate requests and the generous pay package of its chief executive, which amounted to $4.6 million last year, Blue Shield may be trying to improve its image, Mr. Wright said.
To address the high cost of health care, Mr. Bodaken said that insurers like Blue Shield must work with hospitals, doctors and patients to address some of the underlying cost pressures. But he said the insurer’s goal was to demonstrate that it was not seeking higher profits when it asked for higher rates. “It makes it very clear that we are not about profits,” he said. “We are about getting people health care they need and deserve.”