November 8, 2010
Nonprofit health insurance companies have been stockpiling billions of dollars in surpluses while raising members’ rates, according to an analysis conducted by the nonprofit Consumers Union.
“Consumers are struggling to afford health coverage,” report author Sondra Roberto said. “Those funds could be used in some cases to mitigate these rate increases.”
Insurers are legally required to retain a minimum surplus in order to cover medical bills in the event of a financial downturn. Because no maximum surplus is set, however, many insurers have taken to amassing massive stockpiles.
To assess the degree of this problem, Consumers Union analyzed the surpluses of nonprofit Blue Cross and Blue Shield plans, which cover one in three privately insured U.S. residents. Surpluses ranged between two and seven times the minimum required.
- A d v e r t i s e m e n t
For example, Blue Cross Blue Shield of Arizona had a surplus of $717.1 million in 2009, seven times the required minimum, and raised member rates up to 18 percent in the same year. Regence Blue Cross Blue Shield of Oregon had a surplus of $565.2 million that year — 3.6 times the minimum — and raised rates an average of 25.3 percent. This year, rates went up another 16 percent.
The report highlights a flaw of the United States’ widely criticized private health care system.
“The vast conglomerate of insurance companies, hospitals, physicians, pharmaceutical companies, and physician trade associations keep [their] philosophical domination institutionalized,” writes Richard Levinton in his book Physician: Medicine and the Unsuspected Battle for Human Freedom.
“One of the results is the awesome, untenable, unaffordable $900 billion a year medical services bill — the world’s largest — which no agency … can possibly pay for anymore.”
Consumers Union is calling for state governments to cap maximum surplus levels. Michigan has already done so, capping surpluses at five times the minimum. The state deliberately left the cap a little high to protect the finances of Blue Cross Blue Shield Michigan, which insures more than half the state’s residents.
The company’s surplus typically remains halfway between the minimum and the maximum.
“It seems to have worked relatively well,” Insurance Commissioner Ken Ross said.
Sources for this story include: http://www.usatoday.com/money/indus….