Non-profit Blue Cross and Blue Shield health plans stockpiled billions of dollars during the past decade, yet continued to hit consumers with double-digit premium increases, Consumers Union found in an analysis of 10 of the plans' finances.
Insurers must keep surplus money to ensure they can pay policyholders' medical bills if unexpected market conditions develop. Yet seven of the plans examined held more than three times the amount regulators consider the minimum needed to do that, according to a report being released today by the non-profit consumer group.
"Consumers are struggling to afford health coverage," said report author Sondra Roberto. "Those funds could be used in some cases to mitigate these rate increases."
The report calls on state insurance regulators to scrutinize surpluses when considering rate increases and set maximum limits for surpluses. In most states, it said, regulators focus only on ensuring companies have minimum surpluses to be financially sound.
Alissa Fox, a senior vice president at the Blue Cross and Blue Shield Association, said this is a "dangerous" time for regulators to limit health plans' surpluses because of great uncertainty about how insurance costs will change under the nation's new health law. "It's a safety net," she said.
Consumers Union studied non-profit Blue Cross and Blue Shield plans because they cover one in three Americans with private insurance.
Examples cited in the report include:
•Blue Cross Blue Shield of Arizona: A $717.1 million surplus in 2009, seven times the regulatory minimum. The plan raised rates for individual market customers by as much as 18% in 2009. Company spokeswoman Regena Frieden said: "We believe the amount we have in reserves is appropriate."
• Regence Blue Cross Blue Shield of Oregon: A surplus of $565.2 million in 2009, about 3.6 times the regulatory minimum. The plan raised rates on some individual plans an average of 25.3% in 2009 and 16% in 2010. Spokeswoman Angela Hult said the company lost money on its individual policies and that the surplus is "essential to protecting our members from surges in claims costs."
Regulating surpluses is a difficult balancing act because keeping plans financially sound is critical, regulators said. Each plan has different surplus risks and needs depending on its members.
Oregon Insurance Division administrator Teresa Miller, whose office considered Regence's surplus and limited its request for a higher 2010 rate hike, said: "The tough question is how much surplus is too much surplus. There is no agreement on that."
The Oregon Legislature last year gave state regulators the explicit authority to consider a company's surplus when it reviews rates - a tool Miller said her agency had sought since 2007. A report on the agency's website charts how surplus levels have risen since 2001.
In Michigan, a law caps the surplus of the state's Blue Cross Blue Shield plan at five times the regulatory minimum. Insurance Commissioner Ken Ross said the state's Legislature wanted to give the insurer flexibility but also protect consumers against the possibility the plan could hold too much money in its surplus funds. Blue Cross Blue Shield of Michigan has rarely neared the limit and usually is about halfway between the minimum and maximum. "It seems to have worked relatively well," Ross said.
The company insures more than half of the people in Michigan, Ross said, so it's critical it have enough capital to remain financially sound. "Their health in many ways goes to the health of the entire health care system in Michigan," he said.
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