Blue Cross Blue Shield of North Carolina gets plenty of attention around here. From lobbying tactics to executive pay, from sponsorship of lavish events to outsourcing IT, we’re all over Blue. So it’s nice to see someone else get in on the action. Consumers Union, publisher of the OCD-beloved Consumer Reports, has a great new study on how so many nonprofit BCBS’s have ended up with so much “surplus” – which in any other context would be known as profit. Seems BCBSNC is not alone in holding on to more than state law requires even as it jacks up premiums annually. “In our sampling of ten diverse nonprofit BCBS plans, we found that 7 out of 10 of the plans held more than three times the amount of surplus that regulators consider to be the minimum amount needed for solvency protection.”
To be fair, our Blue isn’t the worst Blue there is: “For example, as of the end of 2009, BCBS of Arizona has surplus more than seven times the regulatory minimum. Health Care Service Corporation, a mutual insurer doing business as BCBS of Texas, Illinois, New Mexico and Oklahoma, has five times the regulatory minimum. Meanwhile, over the past three years both insurers continued to raise their rates.” Wow. Still:
Blue Cross Blue Shield of North Carolina raised rates on some individuals and families 18.44% in 2008, 8.5% in 2009, and 12.24% in 2010, while growing surplus to $1.4 billion in 2009, about 4.5 times the regulatory minimum.”
How is that helpful? To the insured, I mean. I know they need some surplus, but how does it help me for BCBSNC to hike my rates during the biggest recession in years when it’s already sitting on 4.5 times the cash its required to have on hand? How are their rate increases approved when we all know they’re sitting on a big ole surplus? “[M]ost states do not put limits on how much surplus insurers can accumulate and most do not have an explicit mandate to consider whether surplus levels are sufficient or too high when deciding to approve or disapprove a requested rate increase.” Hmmmm.
Of course it’s important for BCBSNC to have some surplus, I’m not denying that. But do they need so much? Couldn’t they use some to offset rates increases? Or, at the very least, couldn’t they stop directing a set portion of the increases to surplus, particularly since they’re operating in a stable environment?
Four of the ten plans studied experienced no periods of underwriting loss during the nine-year period (Arizona, North Carolina, Tennessee, and Wyoming). Annual gains among those plans varied, on average, from 2.9% (North Carolina) to 7.7% (Arizona). … That shows that … the underwriting cycle was far tamer than that on which … insurers and regulators may still rely today to develop target surplus ranges.”
There’s a whole lot more in the reports, including lots of sexy math and some actuarial action, but the upshot is clear.
To realize the promise of health reform, our collective challenge is to ensure that health insurance coverage is affordable. Some nonprofit health insurance companies continue to stockpile large amounts of surplus, funded by premium dollars. Health advocates, local grassroots organizations, concerned consumers, and some policymakers need to tackle the issue of potentially excessive surplus funds.”
Grassroots organizations and concerned consumers, that sounds like us, doesn’t it? Wouldn’t it be great if we a had big, cool buddy to help us? The summary of the report concludes:
Based on its findings, Consumers Union is recommending state insurance commissioners examine these surpluses, develop appropriate ranges for minimum and maximum surplus, and disapprove or reduce rate increases, particularly on individual market plans, when the company has more surplus than is necessary for solvency protection.
Whatcha say, Wayne?