Blue Shield of California Must Rebate Some of Huge Obamacare Profits

Irfan Khan/Los Angeles Times via Getty Images

Blue Shield of California violated Obamacare’s mandated requirement that their medical expenditures be a minimum of 80 percent of healthcare premiums paid. Under the law, Blue Shield will be required to rebate almost $83 million to individuals and small businesses. But by destroying small and regional competition, the supposedly not-for-profit Blue Shield, after its rebate, still made $52 million more profit under Obamacare.

Obamacare was sold to the American public as an opportunity to save $2,500 a year for a family of four. But as Breitbart News reported in “Obamacare’s Monopoly Pricing Explains Health Care Merger Mania,” the association of “American Health Insurance Plans”–the industry super-lobby–invested $102.4 million to urge the then-Democrat-controlled Congress to tweak the 2010 Obamacare legislation to allow more profitability and greater industry concentration than the prior insurance regulatory structure.

Forbes reported in late 2013 that “In California, Obamacare to Increase Individual Health Insurance Premiums By 64-146%. California Obamacare costs continue to spiral up. Breitbart News reported two weeks ago that policyholder premiums under the ‘Covered California’ Obamacare exchange will jump another $384 in Northern California and $296 in Southern California next year.

Blue Shield did acknowledged that they violated the Affordable Care Act’s (Obamacare) mandates requiring insurers spend at least 80 percent of healthcare premium dollars for individual and small business health plans on medical services. As a result of that, their “medical expense ratio” came in at 76.8 percent. Consequently, Blue Shield will owe $61.7 million in rebates to about 454,000 individual and family plan enrollees, and another $21.1 million to 19,000 small business policyholders.

But the real scandal should be that in 2012, just before Obamacare’s roll-out, Kaiser and the other big insurers’ average medical expense ratio as a percentage of individual and small group healthcare premiums was about 82 percent. That means that Blue Shield after the rebate is making an extra +5.2 percent profit under Obamacare.

Blue Shield officials said they will pay the Obamacare rebate to policyholders by Sept. 30. But after the rebate, Blue Shield will still get to keep an extra +2 percent, or +$51.7 million, more in profit than they would have before Obamacare.

This profitability explains why S&P 500 Health Care Index, comprised of the big healthcare companies, is up 305 percent since President Obama took office. The 6.5-year boom in healthcare stocks is due to the fastest price inflation in the sector’s history.

Although the inflation rate was only 0.8 percent last year, national health spending grew by 5.0 percent. The 2014 health spending share of national GDP came in at 17.8 percent, up from 16.0 percent when President Obama took office. Prescription drugs were the fastest growing healthcare expenditure last year, rising by 13.0 percent.

Big government healthcare is just as out of control in cost as big government. The Obama White House promised medical costs would plummet, because they said their socialist healthcare model would supposedly create lots of new competition to drive down the evil insurance companies’ profits. Looking at big healthcare insurance companies’ financial statements, evil insurance profits are skyrocketing.


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