Blue Shield of California | California Health …...have access to high quality, affordable health...

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Our mission is to ensure

have access to high quality, affordable health care

2015 Mission Report

all californians

Contents

2 A Message from Our CEO

3 Truly Mission-Driven 4 Serving All Californians 5 Striving for an Excellent Customer Experience 6 Transforming Health Care 8 Improving the Quality of Care10 InfluencingPublicPolicy12 CreatingaGreatPlacetoWork

13 Good Corporate Citizen 14 Operating with Integrity 16 Supporting Diversity and Inclusion 17 Encouraging Employee Volunteerism18 PromotingEnvironmentalSustainability

19 Good Steward of Our Resources20 CappingOurProfits21 EnsuringFinancialStability 22 Managing Our Finances 23 Supporting Our Foundation

As a nonprofit health plan, we are driven by a singular goal — to fulfill our mission. Our three fundamental obligations are to be:

Truly mission-driven

A good corporate citizen

A g

ood steward of our resources

All information within the 2015 Mission Report iscurrentasofDecember31,2015.

1TRULY MISSION-DRIVEN GOOD CORPORATE CITIZEN GOOD STEWARD2015 Mission Report

A Message from Our CEO

Blue Shield of California is here to transform a dysfunc-tionalhealthcaresystemthatisbankruptingusasasocietyintoonethatisworthyofourfamilyandfriends,andsustainablyaffordable.Asanonprofithealthplan,weareuniquelypositionedtoachievethisambitiousgoal.Todothis,wehavethreefundamentalobligations:

Be Truly Mission-Driven

Ourjobistofindandpursuethebestpathtowardfulfillingourmission.ItisaboutmakingsureallCali-fornians can access the care they deserve at a price theycanafford,notmaximizingprofitsorkeepingshareholdershappy.

Itisaformidablechallenge,butwehavemadesubstantialprogress.Wehavedevelopedanationally- recognizedmodelforhowphysiciangroups,hospitalsandBlueShieldcanworktogethertoreducecostsandimprovequality.Today,wehavealmost40AccountableCareOrganizationsacrossCalifornia.

Wehavealsoremainedaconsistentandvocaladvo-cateforpublicpolicythathelpsusfulfillourmission,irrespectiveofwhetheritispopularinourindustry.Thisisthesituationwefoundourselvesinbackin2002,whenwesupporteduniversalcoverage,longbeforethepassageoftheAffordableCareAct.

Be a Good Corporate Citizen

How we pursue our mission is just as important as what weachieve.Weknowthatwebuildtrustthroughouractions,andthisdemandsweholdourselvestothehighestethicalstandards,actwithintegrity,treatouremployeesfairlyandwell,conservenaturalresourcesandstrengthenourconnectionwithcommunities.Inshort,boththeendsandthemeansareimportant.

Be a Good Steward of Our Resources

Wereceivebillionsofdollarseachyearfromourmembersandcustomers,andwehaveanobligationto them to use that money in ways that further access toaffordable,high-qualityhealthcare.

Onewaywedothisisbyvoluntarilycappingournetincomeat2%ofrevenue,andreturninganythingabovethattocustomersandthecommunity.Wealsocontributeasignificantportionofourincomeeveryyear to strengthen California’s healthcare safety net andhelpenddomesticviolence,throughoursupportofBlueShieldofCaliforniaFoundation.

Our Commitment to Transparency

In2015,weacquiredCare1stHealthPlan,whichenabledustobeginservinglow-incomeindividualswhoreceivecoveragethroughMedi-Cal.WithoneinthreeCaliforniansreceivingcoveragethroughthisprogram,offering plans to this underserved population is critical toourmission.OuracquisitionofCare1stalsobroughtheightenedscrutinybyregulatorsandconsumergroupsaboutBlueShield’sobligationsasanonprofithealthplan.Thisscrutinypushedustobemoretransparentaboutwhatwebelieveitmeanstobeagreatnonprofit.

WeinviteyoutoreviewourinauguralMissionReportandletusknowwhatyouthinkbysendingusyourfeedbackatcitizenship@blueshieldca.com.

Ibelievewehaveanobligationtotryandmaketheworldabetterplaceinthefiniteamountoftimewehave.Makinghealthcareworthyofourfamilyandfriendsandsustainablyaffordableisourcalling,andwewillcontinuetoworkdiligentlyeverydaytoachieveit.

Sincerely,

Paul Markovich, President and Chief Executive Officer, Blue Shield of California

Watch the Video Online

2015 Mission Report 2TRULY MISSION-DRIVEN GOOD CORPORATE CITIZEN GOOD STEWARD

mailto: [email protected]

http://citizenship.blueshieldca.com/CEO-message/#transforming-healthcare

truly mission-drivenForus,beingmission-drivenmeansbeingahealthplanthatleadstheindustryindevelopingmeaningfulcollaborationswithproviderstoimprovehealthoutcomes.Italsomeansworkingtoinfluencepublicpolicythatadvancesourmission.

TRULY MISSION-DRIVEN GOOD CORPORATE CITIZEN GOOD STEWARDTRULY MISSION-DRIVEN GOOD CORPORATE CITIZEN GOOD STEWARD2015 Mission Report

Serving All CaliforniansOver four million have access to health care providers through coveragefromBlueShieldofCaliforniaoroneofouraffiliates.

Attheendof2015,BlueShieldacquiredCare1stHealthPlan,a LosAngeles-basedMedicaidandMedicaremanagedhealthplanprimarilyservingover550,000membersinSouthernCalifornia,with asmallpresenceinArizonaandTexas.Theacquisitionincreases BlueShield’sMedicaremembershipandmarksourentryinto MedicaidandMedi-Cal,thefederalandstateprogramsthat servelow-incomeindividuals.

Care1st’s community connections and experience serving the underservedMedicaidpopulationenableBlueShieldtotakea significantleapforwardinadvancingourmission.

Inobtainingapprovalfortheacquisition,weagreedtoseveral undertakingswithourstateregulator,theCaliforniaDepartment ofManagedHealthCare,including:

• ConvertingCare1stintoanonprofit

• Contributing$10milliontoconsumerassistanceprograms overafive-yearperiod

• Committing$50milliontostrengthenthehealthcaredelivery system,particularlyMedi-Cal,throughprogramstoimprove infrastructureattheplanandproviderlevel,includinga providerdirectorydatabase

• Contributingaminimumof$14millionannuallyto Blue Shield of California Foundation for the next ten years

Employer plans

Individual andFamily Plans

Medicare/Medicaid

Members: Breakdown of where people get their healthcare

14.9%

64.7%

20.4%

Type of plans our members have By the numbers

#1First in enrollment in Covered California for 2016 individual and family plans

4Mtotalmembers

56%of our Individual and FamilyPlanmemberspurchased their plans through Covered California


Striving for an Excellent Customer ExperienceOurmembersdeserveexcellentservice,startingwithfundamentals such as receiving an ID card or paying abillinatimelymanner.Wearecommittedtomakingtheseactivitiessimple,reliableandaccurate.

TheAffordableCareActprovidedmillionsofCali-forniansaccesstohealthcoverage,dramaticallychangingBlueShield’sbusinessapproachandcustomerbase.Asaresult,wefacedasignificantincreaseinmembership,attimesstrainingoursystems.

Wehavetakenanumberofactionstostrengthenhowweserveourcustomers,including:

• In2015,wesuccessfullyupgradedandoverhauledourcoreinformationtechnologysystems.

• Weareexpandingdigitaltoolsandresourcesforourmemberssotheycanmovequicklythroughtheclaimsprocessandreceivenotificationaboutupcomingappointments.

KEEPING OUR DIRECTORY OF PROVIDERS ACCURATE AND UP-TO-DATEOurmembersrelyonustokeepthedirectoryofproviders

intheBlueShieldnetworkup-to-dateandaccurate.In

2014,theDepartmentofManagedHealthCare(DMHC)

conductedaNon-RoutineSurveyofBlueShield’sProvider

Networks.Initsfinalreport,theDMHCconcludedthatBlue

Shieldhaddeficiencieswithits2014IndividualandFamily

PlansProviderDirectory.

Throughout2014and2015,BlueShieldworkedtolessenthe

confusionintheprovidercommunityaroundthenetworks

builtfortheCoveredCaliforniamarketplace,andbetter

communicateinformationaboutthenetworkstoour

members.Thisincluded:

• Providereducationandoutreach

• Onsite visits to providers

• Educationalwebinars

• Distributingtoolkitstophysicians’officemanagers

aboutBlueShield’snetworks


Transforming Health Care

Questions & Answers with Kristen Miranda, Senior Vice President of Strategic Partnership and Innovation, Blue Shield of California

What is an Accountable Care Organization (ACO)? OurACOsareformalcollaborationsbetweenBlueShield,physiciansandhospitalsinwhichallpartiesagreetobejointlyaccountableforthequality,costandaccesstocareforadefinedgroupofpatients.ACOs are central to Blue Shield’s strategy for trans-formingthehealthcaresystem.

How does an ACO work? ACOsuseasharedannualbudgetoftotalexpectedspending,alongwithanagreedsetofqualitymetrics.Therefore,allpartiessharetheriskandhaveanincentivetoimprovecareratherthanpassingcostsontomembers.

What is unique about Blue Shield’s model?WemakeinvestmentstostrengthenthecapacityofourACOproviders,forexample,byembeddingBlueShieldemployees–suchasaprojectmanagerorafinancialanalyst–withinmanyproviderorganizations.Thislevelofsupportisunprecedentedintheindustry.WealsoworkcloselywithourACOproviderstodevelopourdrugformulariesandmedicationmanagementprograms.

How many ACOs does Blue Shield currently have?Wehave36ACOsandgrowing.In2015,weintroducedTrio,ourfirstHealthMaintenanceOrganization(HMO)networkbuiltentirelyofACOprovidersanddesignedforemployergroupcustomers.ItexpandsthereachofourACOstoawiderpopulationacrossthestate.


Our goal is to ensure 50% of our membersreceivecarefromprovidersparticipatinginACOsby2018.


http://citizenship.blueshieldca.com/truly-mission-driven/#truly-mission-driven

Our ACO results since 2010Accountable Care Organizations by the numbers

340Kmembers in ACOs

36Blue Shield ACOs

3.5%annual increase in cost of health care – roughly half the increase of our non-ACO plans

up to 13% reduction in hospital admissions

up to 27% decrease in days spent in the hospital

$325M in total cost savings forourmembers

Our Accountable Care Organizations benefit our members by helping to:

PhysiciansBlue ShieldHospitals

Shorten hospital stays

Reduce readmissions

Manage drug therapies to improve clinical outcomes

Coordinate care to eliminate duplication

Avoid unnecessary trips to the emergency room

Prescribe the most effective and affordable medications

It’s through partnerships like the one we enjoy with Blue Shield of California that we are advancing health care in California and across the nation. We look forward to continuing our collaboration with Blue Shield to realize the promise of the Affordable Care Act for all patients.—Lloyd H. Dean, President and CEO, Dignity Health


WALKADOO® Personalizedstepgoalsandthelatestfitnesstrackertechnologyhelpmembersstayactive.

ORNISH REVERSAL PROGRAM Lifestyle medicine incorporating physicalactivity,wholefoodsdiet,stressreductionandsocialsupport.

QUITNET® A supportive online community with access to trained quit coaches andsmokingcessationaidsassistmembersinkickingthehabit forgood.

DAILY CHALLENGE® Daily,customizeddietandlifestylerecommendationsaidmembers indesigningawell-beingprogramjustforthem.

Improving the Quality of CareBlueShieldisworkingtoimprovethequalityofcareourmembersaccessthroughourcoverage.Belowareafewexamples:

HEALTH CARE QUALITY INDEX To measure and assess our progress on improving the qualityofcareprovidedtoourmembers,wedevelopedourownindex.Itincludesover70metricsinclinicalquality,patientexperienceandbehavioralhealth.Weupdatethemetricsannuallytoensuretheystaycurrentwithmedicalresearchandregulation.

MEDICARE STAR RATINGS Medicare STAR ratings include a variety of metrics that assess howweasaplanaredoinginservingourcustomers,howourprovidersareperformingincaringforourmembersandourmembers’overallclinicalcareoutcomes.In2015, wewereproudtomaintainourMedicareSTARratingat4.0STARSforthefifthconsecu-tiveyear.

PRACTICES OF THE FUTUREWecollaboratewithproviderswithinaparticularspecialtyandseekwaystobringtolifepatient-centered,state-of-the-artprograms.OurOncologyPracticesoftheFutureeffort,forexample,workstoimprovethequality ofcareforcancerpatients.Bytheendof2015,wehadsixofthesepractices.

MENTAL HEALTHTheAffordableCareActstrengthenedmentalhealthlawsbyexpandingparityrequirementsformillionsofAmericans,andweworktoensureourmembershaveaccesstohighqualitybehavioralhealthcaretomeettheirneeds. WecontractandworkcloselywithMagellanHealth,ahealthcaremanagementcompany,tomanagebehavioralhealthcarebenefitsforthemajorityofourmembers.

In2015,wewereproudtomaintainourMedicareSTARratingat4.0outof5.0STARSforthefifthconsecutiveyear.

Encouraging Members to Live Healthier Lives

Wellvolution,ourindustry-leadingwellnessprogramwith70,000activemembers,providestoolsandresourcestoencouragehealthyliving.

Throughcollaborationwithleadingresearchorganizations,Wellvolutionintegratesthelatest,evidence-basedmedicalresearchandoffersmembersresourcessuchas:


Improving Care for Serious or Chronic Illnesses

Weworkwithproviderstoimplementclinicalprogramsthatcandelivermorecost-effective,qualitycare,particularlyforthemostchronicallyillpatients.Together,wearedevelopingintegratedcaredeliverymodelsthatprovidemembersaccesstocarewhenandwheretheyneeditmost.Theinterconnectedsystemconsistsof:

High-Risk ClinicsTeamsofdoctors,nursesandsocialworkersprovidecaretopatientswithcomplex conditions in a setting that meetstheircomprehensiveneeds.

Advanced Facility CareTeams focus on care coordination so patients can receive care in the right setting and avoid or shorten emer-gencyroomandhospitalvisits.

Home CareThe most complex or chronically ill canreceivepalliativecare,medica-tion management and care transition supportintheirhomeorothersettings.

Care Coordination and ManagementTeam-based,integratedcareforcomplex cases reduces hospital and emergencyroomuse,decreasesfrag-mented care and helps patients navigateanoftencomplexsystem.


Influencing Public PolicyBlue Shield has a long history of leading and supporting efforts to transform a fragmented and overly complex healthcaresystemintoonethatbettermeetstheneedsofourmembers.Thisincludesworkingtoinflu-encepublicpolicythathelpsusfulfillourmission. Forexample:

• In2002,despiteoppositionfromsomeinourindustryandsevenyearsbeforethepassageoftheAfford-ableCareAct,BlueShieldputforthaspecificplanforuniversalcoverage.

• WeprovidedcrucialbackingtoCalifornia’spublicexchange,knownasCoveredCalifornia,andsupportedtheexchange’sabilitytonegotiatepricestobenefitconsumers.

• WesupportedeffortsandhelpedpasslegislationinCaliforniatoincreasepricingtransparency.

• WesupporttheInstituteforClinicalandEconomicReview(ICER),anonprofitthathasbeeninstru-mentalinadvancingevidence-basedtreatment.

Investing in Data and Transparency

In2014,BlueShieldofCaliforniaandAnthemBlueCrosslaunchedtheCaliforniaIntegratedDataExchange(CalINDEX),anindependent,statewidehealthinformationexchangedesignedtooperateforthebenefitofallCalifornians.CalINDEXenableshealthinformationtobesecurelysharedelectronicallysoproviderscanbemoreefficientandprovidehigherqualitycareforpatients.

WealsohelpedlaunchtheCaliforniaHealthcarePerfor-manceInformationSystem(CHPI),anonprofitorganiza-tion whose mission is to serve as a trusted source of data tomeasurethequalityandaffordabilityofcareandtoreporthealthcareproviderperformanceratings.

BlueShieldprovided$35.6millioninseedfundingfor CalINDEX,anindependentnonprofitorganization, usingfundsfromour2%pledgecommitment.

POLITICAL CONTRIBUTIONSBlueShieldcontributestostateandlocalcandidates,

politicalparties,politicalcommitteesandballotmeasures

thathelpusadvanceourmission.BlueShieldworkswith

bothpoliticalparties.In2015,BlueShieldcontributed

$650,000tostatecandidatesandcommittees.

Blue Shield also has an employee political action committee

fundedbyvoluntarycontributionsofparticipatingeligible

BlueShieldemployees.Thecommitteemakespolitical

contributionsatthefederallevel.In2015,employeescontrib-

utedatotalof$114,000.


Reining in Prescription Drug Costs

It is estimated that spending on high-priced prescription drugswillquadrupleby2020.Thiscreatespotentiallydevastatingroadblocksforpatients’accesstocare.Italsoputsamajorstrainonthehealthsystem,leavingtaxpayers,consumersandemployerstobeartheburden.

BlueShieldisengagedinadvocacyandpublicpolicyeffortsatthestateandnationalleveltomakeprescription drug pricing more transparent and to evaluatethetruevalueofnewmedications.Thesepolicyeffortsinclude:

• ThenationalCampaignforSustainable RxPricing(CSRxP)

• TheCaliforniaAssociationofHealthPlans’ “Runaway Rx” campaign

• ThePharmaceuticalCostTransparencyActof2015,legislationproposedinCaliforniatobringmore transparency to prescription drug pricing in thestate.Althoughthebillfailedtopassin2015,we continue to support legislation to address drug pricing and transparency

PREVENTING THE ABUSE OF OPIOIDSOver-prescribingopioidnarcotics–suchashydrocodone,

codeine or oxycodone – for chronic pain is a rampant

problemacrosstheUnitedStates.BlueShieldhasbeena

vocaladvocateforcombatingthisepidemic.Additionally,

throughourNarcoticsSafetyInitiative,licensedpharmacists,

nurses,casemanagersandcliniciansproactivelyidentify

andreviewmembercasesandevaluaterisks.Wealso

connectmemberswithournetworkofmentalhealth

providersandofferalternatepainmanagementstrategies.


Creating a Great Place to Work

Questions & Answers with Mary O’Hara, Chief Human Resources Officer and Senior Vice President of Internal Communications

How does your team support the mission?Tofulfillourambitiousstrategies,andultimatelyourmission,weneedgreatpeopledoingtheirbestwork.Therefore,wehavetomakeBlueShieldagreatplacetowork.

How is Blue Shield creating a great workplace?Wearefocusedonthreethings:buildingthebestleadersforthefuture,givingpeopleanopportunityto grow and having an employee experience that matchesthecustomerexperienceweaspireto.

How are you building leaders for the future?Weviewleadershipskillsasessentialtooursuccess,sowehavemadeastrongorganizationalcommitmenttoleadershipdevelopment.Throughourprograms,wearebuildingleaderswhocanattractanddeveloptalentedpeople,organizeandbuildastrongteam,setavision,getresultsandcontinuouslylearn.

What are some other strategies for attracting and retaining outstanding employees?Webelieveacultureofappreciationandrecognitioncontributestoapositiveemployeeexperienceandhelpsusbuildagreatworkplace.Wehaveanenter-prise recognition program that honors individuals and teamsthatchampioninnovativeideas,andwhoseachievements create a positive change in support of ourmission.

77%of our employees said that Blue Shield is a great placetowork

85%of our employees identify Blue Shield’s mission as one of the most positive components of their overalljobsatisfaction



http://citizenship.blueshieldca.com/truly-mission-driven/#employees

good corporate citizenWehavetopursueourmissioninawaythatisethicalandfair,becausehowwegetthereisjustasimportantaswhen.Thatmeansdoingtherightthing,actingwithintegrity,beingemblematicofourvalues,treatingemployeeswell,conservingnaturalresourcesandstrengtheningourconnectionwithcommunities.


Operating with Integrity Ourcompany’songoingsuccess,andourabilitytotransformthehealthcaresystem,demandsthatwehold ourselves to the highest ethical standards of businessconduct.Ourcodeofconductprovidesaframeworkforhowwedefinedoingbusinesstherightway,anditguideshowweworkeveryday.

AlthoughBlueShieldisanonprofit,wearenonethelesscommittedtoaligningourprocesseswithbestprac-ticesincorporategovernance.OurBoardofDirectorsestablishesthecompany’sstrategicplanandoverseesmanagement,includingperformanceagainstourobjectivesandprogressadvancingourmission.

OurbylawsrequirethattheBoardofDirectorsconsistprimarilyofCaliforniaresidents,andthatthemajorityofourdirectorsbeindependent.Attheendof2015,ourBoardwascomprisedoftenmembers,allofwhom–withtheexceptionofourCEO–wereindependent.Our Board has an independent Chair – who is not the CEO–andsixstandingcommittees.

Moredetailsaboutourcodeofconductand governanceguidelinescanbefoundhere.

Paying for Performance

Our executive compensation programs are designed to reward executives for delivering strong results for ourmembers.Ourprogramsprovidecompetitivepayopportunities that help us to attract and retain top talent,whileensuringourexecutivesareheldaccount-ableforourshort-termandlong-termperformance.Blue Shield’s executive compensation does not include anyformofcompanyequity.Tolearnmore,clickhere.

PROTECTING OUR MEMBERS’ DATASafeguardingthesecurityofoursystemsandourmembers’

informationisakeypriority.Weconstantlymonitorourenviron-

mentandtakeallpossiblestepstoensuresecurity.Asapartof

a nationwide program through the Blue Cross and Blue Shield

Association,wearemakingidentityprotectionservicesavail-

abletoourmembers.Theservice,launchedin2016,provides

creditmonitoring,frauddetectionandidentityrepairsupport

onanopt-inbasis.


https://www.blueshieldca.com/bsca/about-blue-shield/corporate-citizenship/governance.sp

https://media.blueshieldca.com/wp-content/uploads/2016/05/Blue-Shield-2015-Exec-Comp-Summary.pdf

CONTINGENT LABORBlueShieldcontractswithexternalorganizationsandindivid-

ualstoperformservicesforourcompany,ortoprovide

additionalorganizationalcapacitywhenweneedit.Atthe

endof2015,approximately3,700full-timeequivalentcontrac-

torsweredoingworkonBlueShield’sbehalfaspartofthese

arrangements.Weconductrobustduediligenceofallour

contingentlaborsupplierstoensuretheyadheretoBlue

Shield’sstandards.

Sourcing Responsibly

BlueShieldspentapproximately$700millionin2015topurchase the goods and services needed to operate ourcompanyandserveourmembers.Werequireoursuppliers to adhere to Blue Shield’s Code of Conduct andotherrelatedpolicies.Wealsoconductextensiveduediligenceofpotentialsuppliers.

Wearecommittedtofosteringadiversesupplierbase.In2015,BlueShieldprocuredapproximately$25millioningoodsandservicesfromcertifiedsmallbusinessesand those that are majority owned and operated bywomen,minorities,servicedisabledveteransandmembersoftheLGBTcommunity.


Race and ethnicity of our workforce

Supporting Diversity and InclusionWehavetoprovideopportunitiesforallofourpeopletogrowpersonallyandprofessionally.ThatincludesattractingadiversegroupofpeopleandmakingBlueShieldahighlyinclusiveplacetowork.Oneofthewayswedothatisthroughouremployeeresourcegroups:

Employees: Gender of our workforce

30%70%

Employees: Total employees

30%70%

Gender of our workforce

WomenLeadtoExcellence(WL2X)is focused on developing women leaders within Blue Shield through targetedmentoring,networking,communitybuildingandskilldevel-opmentopportunities.

BlackEmployeeNetwork(B.E.N.)supportstherecruitment,devel-opment and retention of African Americanemployees.In2015,B.E.N.received external recognition from the National Diversity Council for its efforts,whichhonoredthegroupwithitsDiversityFirstAward.

ShieldPridefocusesoncreatingasafe,inclusiveworkplace;repre-senting Blue Shield at community events;andaddressingtheuniquehealthneedsofthelesbian,gay,bisexualandtransgender(LGBT)population.

0.74% Native Hawaiian orOther Pacific Islander

0.95% American Indian or Alaska Native

2.6% Two or more races

7.4% Black or African American

13.4% Hispanic or Latino

18.2% Asian

56.7% White

0.74% Native Hawaiian orOther Pacific Islander

0.95% American Indian or Alaska Native

2.6% Two or more races

7.4% Black or African American

13.4% Hispanic or Latino

18.2% Asian

56.7% White


Encouraging Employee VolunteerismOur Shield Cares program supports and encourages employeestovolunteerordonatetononprofitorgani-zationswheretheyliveandwork.Itincreasesemployeeengagement and provides our people with an oppor-tunitytoinvestintheirlocalcommunities,strengtheningour company’s presence and connection with commu-nitiesacrossCalifornia.

Throughtheprogram:

• BlueShieldmatchesemployeedonations,upto$1,000annually,tononprofitsinhealthandhumanservices,environmentalissuesanddomesticviolenceawarenessandprevention.

• Beginningin2015,allemployeeswhovolunteeratBlue Shield-endorsed community service activities receiveuptoeighthoursofpaidtimeoff.

BlueShieldalsoorganizestwocompany-widegivingandvolunteerismcampaignsinAprilandAugust.InAugust2015,weheldourfirstannualBlueShieldAgainstDomesticViolenceMonth,duringwhichweorganizedanumberofeventsacrossthecompanyfor employees to volunteer to support domestic violenceawarenessefforts.BlueShieldalsomatchedemployees’donationstodomesticviolenceorganiza-tions–helpingusraisenearly$23,000inonemonth.

$178KtotaldonationsbyBlueShieldin matching gifts and other corporatecontributions

$152Ktotaldonationsbyemployees

4K hourstotal volunteered timebyemployees

Employee giving and volunteering in 2015


Promoting Environmental SustainabilityBlue Shield is committed to conserving natural resources and helping safeguard the health of current and future generationsofCalifornians.Climatechange,inpartic-ular,isoneofthemostpressingchallengesofourtime.Wearecommittedtodoingourpart.Ourenvironmentalsustainabilityeffortsarefocusedon:

ENERGY AND GREENHOUSE GAS (GHG) EMISSIONS Reducing energy use helps us lower our operational costs–whichinturnhelpswithouraffordabilitygoals– and reduces the amount of GHG emissions we generate.Since2012,BlueShieldhasreducedourGHGemissions4%.

WASTEPaperisoneofourmainsourcesofwasteandwehavebeenworkinghardtominimizeit.Since2009,we have reduced the amount of paper we purchase by50%–including7%in2015.Wearealsoaimingtohavezeroelectronicwastethroughexpansionoftheelectronic recycling efforts we have in place in most ofourlocations.

WATERWhileouroperationsarenotwater-intensive,we want to do our part to reduce water consump-tioninthemidstofthestate’smultiyeardrought.Weare implementing a variety of water conservation measuresinourfacilities,fromlow-flowfaucetsto moresustainablelandscaping.

BlueShieldhadthreebuildingsinElDoradoHills and our headquarters in San Francisco designatedasEnergyStarfacilitiesin2015.

6,0065,874 5,929

5,768

2012 2013 2014 2015

Electric power

Natural gas

868

1,044

987959

124,346 125,545 124,455

133,804

18M17.6M 17.8M

17.1MXX XX

2012 2013 2014 2015

2012 2013 2014 2015

2012 2013 2014 2015

Prior to this report, we announced a 13% reduction in emissions from 2009 to 2014. In 2015, in preparation for future goal-setting, we re-set our GHG emissions measurement baseline from 2009 to 2012 to ensure our target baseline is a reliable and accurate reflection of our portfolio today. As a result, this report includes restated emissions performance data that reflects the revised baseline. Our re-baselining efforts and our overall methodolo-gies and assumptions being used to compile Blue Shield of California’s greenhouse gas inventory are all in accordance with the World Resources Institute (WRI) and the World Business Council for Sustainable Develop-ment’s (WBCSD) Greenhouse Gas (GHG) Protocol.

ENERGY USAGE

Water usage (ccf in thousands)

Natural gas (Therm)

Electric power (kWh)

Total GHG emissions by total and source

4%reduction in GHG emissions since 2012

88%of GHG emissions were from electricity


good steward of our resourcesUnlikefor-profithealthplans,BlueShielddoesnothavetogeneratereturnstoshareholders.However,ourmissionchallengesustouseresourcesinawaythatfurthersaccesstoaffordable,qualityhealthcare.Wedosobyinvestingwisely,beinggoodstewardsofourmembers’moneyandembracingacultureofaffordability.WealsogivesubstantiallytoBlueShieldofCaliforniaFoundation, anessentialpartnerinadvancingourmission.


Capping Our ProfitsWeputourcommitmenttobeagoodstewardofresourcesintoactionbyvoluntarilycappingournetincomeat2%ofrevenue.Ifweexceed2%innetincomeinanyyear,wereturnthedifferencetoourcustomersandthecommunity,withapprovalfromourBoardofDirectors.Noothermajorhealthplandoesthis.Sincemakingthispledgein2011,wehavegivenback$560millionintheformofcreditsforourmembers,seedfundingforCalINDEX(seep.10) andothercommunityinvestments.

CHANGES TO OUR WORKFORCEIn2015,BlueShieldinitiatedsomechangestoourworkforce

inordertoensurewehavetherighttalent,skillsand

knowledgetodeliveronourstrategyandreduceour

administrativeexpenses.Weofferedseveranceand

outplacementsupportto408employees.Ofthatnumber,

256 full-time positions were eliminated and 152 positions

werere-scopedorre-filledtostrengthenourabilityto

implementourstrategy.

Where do our members’ premiums go?

Althoughpremiumsarerisingacrosstheindustry,BlueShieldisworkingtokeepcostsdownandmakecaremoreaffordable–fromourcollaborationwithproviders(seep.7)tooureffortstoreininprescriptiondrugpricing (seep.11).Wearealsoworkingtobecomebetterstewardsofourmembers’premiumdollarsbyreducingadministrativecosts.In2016,weinitiatedaplantoreduceadministrativecostsby$50million.HereishowaBlueShieldmember’spremiumdollarisspent:

=

39¢to hospitals

26¢ to physicians

14¢ to pharmaceuticals

4¢to othermedicalservices

1¢ to net income

3¢ Governmentmandatedtaxes and fees

13¢ Blue Shield administrative expenses

83¢ Cost of Health Care 17¢ Other Costs

NOTE:CostofHealthcareexcludesincomefrominvestmentsandstateandfederalincometaxes.


Ensuring Financial StabilityOneofthewaysweprotectourfinancialstrengthandstabilityistomaintainasufficientlevelofnetassets,referredtoasourstabilizationfund.Asanonprofit,wehavelimitedaccesstothecapitalmarketsasasourceofcapitalfunding.Therefore,wealsolooktoourstabili-zationfundtowithstandpotentialshortfalls.

Additionally,maintaininganadequatestabilizationfundenablesBlueShieldtomaintainits“CategoryA”financialstrengthrating,whichhelpsdemonstrateourstrengthtopotentialcustomersandbrokerswhenwearecompetingforbusiness.

Inourindustry,astandardmeasureofstabilizationfundsufficiencyisrisk-basedcapital(RBC).LevelsofRBCaremonitoredbyregulators,theNationalAssociationofInsuranceCommissioners(NAIC),theBlueCrossandBlueShieldAssociation(BCBSA)andfinancialinstitu-tions as a measure of the adequacy of our net assets toremainfinanciallyviableandensuretheprotectionofourmembers.

Webelieveourstabilizationfundandrisk-basedcapitallevelsattheendof2015aresufficienttocomplywithregulatoryandindustryrequirements,aswellastoprovidefinancialstabilityforourmembersandensureclaimscanalwaysbepaid.In2015,actuarialfirmMillimananalyzedtheamountofcapitalappropriatetosupportouroperationsandidentifiedanidealRBCrangeof600%to900%.

Risked Based Capital

In2015,weinvested$1.2billionincashtoacquireCare1st.Whileourtotalassetsgrew,theamountofassetsconsid-ered“allowedcapital”decreasedfrom97%to82%ofourtotalassets.Atthesametime,therequiredcapitalfortheRiskBasedCapital(RBC)ratioincreased.TheresultwasadecreaseinourRBCratiofromover1,000%to576%.Our2016financialplansetsatargettoelevateRBCto600%orbetterbytheendof2016.

*Range recommended by Milliman

Impact of Care 1st acquisitionBlue Shield Total Assets

1021% 576%Dec 2014 Dec 2015

375% BCBSA Minimum

200% NAIC Minimum

RBCRatio

Allowed capital

Required capital=

600-900% RBC ratio*


Managing Our Finances In2015,BlueShieldreportedanetincomeof$115million,downfrom$162millionin2014.Ofthecompa-ny’srevenuefrompremiums,83.4%wasspentonmedicalcare.BlueShield’sprofitmarginwas0.8%and,asaresult,wedidnotreturnanyfundsaspartofour2%pledgecommitment.BlueShieldcontributed$35milliontoBlueShieldofCaliforniaFoundation(seep.24).

AS A NONPROFIT, DOES BLUE SHIELD PAY TAXES?Absolutely.Whileweareanonprofit,wepayfullfederaland

Californiastateincometaxes,theCaliforniamanagedcare

organizationtaxandAffordableCareActtaxesandfees.

In2015,wepaidapproximately$417millioninACAtaxes,

premiumtaxesandotherfeesalongwith$228millionin

stateandfederalincometaxes.

Blue Shield was previously exempt from paying California state

incometaxesbut,beginningin2014,webecamesubjectto

thistax.In2015,wepaid$32millioninstateincometaxes.The

CaliforniaFranchiseTaxBoardhasindicatedthatwemaybe

requiredtopaystateincometaxesforyearspriorto2014,when

ourtaxstatuschanged,anassertionwearechallenging.

Blue Shield of California consolidated financials*

Membership in thousands ($ in millions) 2015 2014 2013 2012

Endingmembership 4,080 3,481 2,944 2,891

Premiums,net $14,836 $13,349 $10,824 $10,240

Less:medicalexpenses 12,369 10,948 9,194 8,643

Gross Profit $2,466 $2,401 $1,630 $1,597Medical loss ratio 83.4% 82.0%** 84.9% 84.4%

Marketingandselling 595 570 543 515

ACAtaxes,premiumtaxesandotherfees 417 357 62 47

General and administrative 1,341 1,191 974 960

Total admin expenses $2,352 $2,118 $1,579 $1,522

Pre-taxincome(loss)fromhealthoperations 114 283 51 75

Investment income 229 271 198 224

Income before taxes $343 $544 $249 $299

Income taxes 228 392*** 78 95

Net income $115 $162 $171 $204Profit margin (net income as a % of premiums) 0.8% 1.2% 1.6% 2.0%

2% Pledge amount $0 $0 $0 $53Foundation contribution (millions) $35 $35 $35 $40

*AdditionaldetailsonBlueShield’sfinancialperfor-mancecanbefoundontheCaliforniaDepartmentofManagedHealthCarewebsite (wpso.dmhc.ca.gov/fe/search)bysearchingfor“CaliforniaPhysicians’Service.”

**2014medicallossratioreflectstheimpactofAfford-ableCareAct(ACA)taxesonpremiums;weesti-mate this to account for a reduction of 2 percentage pointsfromthatreportedabove.

***Increasein2014incometaxexpensereflectsim-provedoperationalperformance,thenon-deduct-ibilityofanewACAtaxandaprotestedassessmentfromtheCaliforniaFranchiseTaxBoard.


http://wpso.dmhc.ca.gov/fe/search

Supporting Our Foundation

Questions & Answers with Peter Long, President and CEO, Blue Shield of California Foundation

How does the Foundation support Blue Shield’s mission?WeareanessentialallyinBlueShield’seffortstofulfillitsmission.OurFoundationfocusesonimprovingthelivesofallCalifornians,particularlytheunderserved,bymakinghealthcareaccessible,effectiveandafford-able,andbyendingdomesticviolence.Throughourtwoprogramareas,HealthCareandCoverageandBlueShieldAgainstViolence,weareadvancingthehealthandsafetyforthemostvulnerableCalifornians.

How is the Foundation funded?TheFoundationisanindependentorganizationfundedentirelythroughcontributionsfromBlueShield,whichhasprovidedmorethan$350milliontotheFoundationsince2002.In2014,BlueShieldcontributed$35milliontotheFoundationfordistributionin2015,andcommittedtocontributethesameamountfordistributionin2016.

What types of programs does the Foundation fund? Overthepastdecade,theFoundationhasfundedalmost every private community health center in California;developedandfundedleadershiptrainingprograms for hundreds of community health center anddomesticviolenceorganizationleaders;and,helpedcommunityhealthcentersandpublichospitalscoordinate care within the new healthcare reform environment.

FOUNDATION PROGRAMSTheFoundationisworkingtoimprovethehealthcaresafety

netandenddomesticviolence.Itscoreprogramsare:

HEALTH CARE AND COVERAGETheFoundationworkstoensurethatthoseeligibleforhealthinsuranceandthemost

vulnerableCalifornianswhodonothavecoverageareable

toaccessthecaretheydeserve.

BLUE SHIELD AGAINST VIOLENCE The Foundation is the

largest private funder of domestic violence service

agenciesinCalifornia,awarding$62.3millionsince2002.


2015 total giving per area

Nationwide $1.3M, 16 grants

Statewide $15.9M, 54 grants

North $1.3M, 48 grants

Sacramento

$764.5K, 21 grants

San Francisco Bay Area $4M, 94 grants

Central

$2.3M, 70 grants

Los Angeles

$3.1M, 94 grants

South

$2M, 64 grants

In2015,theFoundationwonTheNationalCommitteeforResponsivePhilanthropy’sImpactAwardforitsDomesticViolenceandHealthCarePartnerships,whichpairsdomesticviolenceserviceorganizationsandcommunityhealthcenters.Grants by program Number of grants

by program

2015 Foundation contributions by county

Californians: Corporate Contributions map

$13.3M

$7.6M

$5.9M

$3.9M

609K

238 grants

41 grants

145 grants

37 grants

Health Careand Coverage

Health Careand Coverage +Blue ShieldAgainst Violence

Blue ShieldAgainst Violence

Other Foundation programs

2015 total giving by grants and dollars

$30.8Mtotal funding

461grants awarded


Find out more about our 2015 Mission Report online at citizenship.blueshieldca.com

©BlueShieldofCalifornia1999-2016.Allrightsreserved.BlueShieldofCaliforniaisanindependentmemberoftheBlueShieldAssociation. HealthinsuranceproductsareofferedbyBlueShieldofCaliforniaLife&HealthInsuranceCompany.HealthplansareofferedbyBlueShieldofCalifornia.

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