Read @ WashingtonPost.com

Health plans may be raising premiums despite outsize surpluses, watchdog finds

Washington Post Staff Writer
Thursday, July 22, 2010; 12:22 PM

 

Nonprofit health insurers may be setting aside unnecessarily large surpluses even as some of them continue to raise premiums, according to an analysis by a consumer rights group.

The report released Thursday by Consumers Union, the nonprofit publisher of Consumer Reports, found that seven of 10 Blue Cross Blue Shield affiliates examined had amassed surpluses more than three times the level regulators deemed necessary for them to remain solvent.

For instance at the close of 2009, Blue Cross Blue Shield of Arizona had a surplus of $717 billion, more than seven times the regulatory minimum. The same year the company raised premiums for its individual market customers between 8.8 percent and 18.4 percent.

Similarly, Regence Blue Shield of Oregon had about 3.6 times the regulatory minimum surplus, yet it raised rates on some individual policies an average of 25.3 percent in April 2009 and 16 percent in April of this year, the study found.

An insurance plan's surplus is essentially the revenue it raises from premiums and investments minus expenses such as the cost of paying medical claims. Companies must maintain enough surplus to protect them from unexpected expenses and losses. But how much surplus is too much is a matter of some debate.

While most states require plans to maintain a minimum level of surplus, only a handful, including Maryland, also monitor whether a nonprofit plan's surplus is "excessive" and if so, require the company to refund its customers.

For-profit plans are less likely to accumulate surpluses substantially above the required minimum because they have an incentive to give the money back to shareholders as profit, said Sondra Roberto, a staff attorney at Consumer Reports who co-wrote the report.

More at WashingtonPost.com

------------------------------------

It is interesting just how fat these non-profits have become with these surpluses. Quite an eye-opener.