A recently published Consumers Union report titled "How Much is Too Much?" contends some non-profit Blue Cross and Blue Shield plans have racked up large cash surpluses while continuing to aggressively raise insurance rates.
BCBS plans, including community-owned charitable plans and subscriber-owned mutual plans, held more than $32 billion in surplus at the end of 2008, according to research from A.M. Best.
Sondra Roberto, staff attorney for Consumers Union, said these findings should prompt state insurance commissioners to take a hard look at the surpluses collected by nonprofit BCBS health plans and give them ammunition to push back against rate increases.
"These Blue plans hit consumers with big premium hikes while they've built up enormous surpluses," Roberto said. "These rate hikes could have been reduced or avoided if companies applied just a portion of their surplus to rate stability, while leaving sufficient funds for solvency protection."
The study examined 10 BCBS plans and found they held more than $9 billion in surplus cash. Seven of the 10 were found to have surpluses in excess of three times the amount regulators benchmark as the minimum amount needed for financial solvency protection.
BCBS executives said the Consumers Union report made false assumptions – among them the idea that cash on hand is a "surplus" as opposed to "reserves" that are meant to serve as security for unexpected increases in health claims.
In addition, unlike large public insurers, Blues plans operate as non-profit entities, which prevent them from seeking additional capital in the public markets to help fund operations, said Bob Kodology, CFO of the Blue Cross Blue Shield Association.
Blue Cross Blue Shield of New Mexico recently filed a lawsuit against acting Insurance Superintendent Johnny Montoya's suspension of the insurer's 21.3 percent increase, which was approved by Montoya's predecessor.
"Because this increase coincides with very challenging financial times for nearly every New Mexican, it's prudent for the Insurance Division and the citizens of this state to know exactly why such rates are warranted," Montoya said, according to a report in the New Mexico Independent.
Other state commissioners, including those in Rhode Island and Maine, have denied requests for larger reserves, while other states have laws on the books limiting the amount of surpluses a company can keep on hand.