KHN Morning Briefing

Summaries of health policy coverage from major news organizations.

Report: Nonprofit Insurers Collected Billions In Surplus While Hiking Premiums

An analysis by Consumers Union has found that non-profit Blue Cross and Blue Shield health plans collected billions of dollars in surplus over the past decade while raising premiums for customers.

USA Today: "Insurers must keep surplus money to ensure they can pay policyholders' medical bills if unexpected market conditions develop. Yet seven of the [10] 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. … The report calls on state insurance regulators to scrutinize surpluses when considering rate increases and set maximum limits for surpluses" (Young, 7/22).

MarketWatch/The Wall Street Journal: Consumers Unions "found that 10 Blues plans collectively held $9.1 billion in surplus funds in 2009, or about $855 per member per year. That's up from $4.6 billion in 2001, or $395 per member per year. ... Nonprofit Blue Cross Blue Shield plans cover about 100 million people, or about one in three Americans with private health insurance" (Gerencher, 7/22). 

WBUR: "[T]he report recommends that insurers spend that extra money on charitable work, refund it to consumers, or use it to set up 'rate stabilization funds' that would lower fast-rising premiums. 'Really, when consumers are struggling to afford health care, should nonprofit plans be holding on to all of this money when they might be using it to reduce rate increases?' says Sondra Roberto, a staff attorney for Consumers Union" (Pfeiffer, 7/22).

Reuters: Blue Cross "countered that the surpluses are necessary to cover all claims, including in emergencies, and as a source of capital, that is not otherwise available for a nonprofit company." The company also "said the recent healthcare overhaul law will extend coverage to millions of new individuals with unpredictable results. 'So when you look at requiring plans to lower those reserves at this time, we think it would be extremely dangerous given health reform's going to require plans to have strong reserves going into this new era,' said Alissa Fox, a senior vice president at Blue Cross" (Lentz, 7/22). 

Raleigh, N.C., News & Observer: "The report also follows news that Blue Cross plans to slash administrative costs by 20 percent, or about $200 million, by 2014. The strategy is aimed at improving financial results amid changes spurred by health reform, but also at keeping premiums down. Blue Cross raised rates an average of 12 percent this year. Some individuals were hit with much higher increases" (Wolf, 7/22).

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