While Building up Huge Surpluses, BCBS Raised Rates

Consumers Union, the nonprofit publisher of Consumer Reports Magazine issued a press release with details from a report in which they examined the surpluses individual nonprofit BCBS plans set aside versus their respective rate increases.  The results are startling.

As the press release notes, a “surplus” is essentially a retained profit.  And, some of the BCBS plans raised rates by 20% per year, while maintaining a surplus of more than three times the amount recommended by regulators for solvency protection.  Some of the more egregious examples include:

• “Blue Cross Blue Shield of Arizona raised rates for its individual market customers between 14.5 percent and 19.4 percent in 2007, 13.1 percent and 15 percent in 2008, and 8.8 percent to 18.4 percent in 2009.  During that time, the company's surplus grew from $648.3 million to $717.1 million, which is more than seven times the amount that regulators consider to be the minimum necessary for solvency protection.”
• “Health Care Service Corporation (HCSC), doing business as Blue Cross Blue Shield of Texas, Illinois, New Mexico and Oklahoma, raised rates in Texas on some individual and family plans multiple times in a year between 2007-2010. Some Blue Cross Blue Shield of Texas rate increases exceeded 20%. In Illinois, the company filed for rate increases of 10.2% in 2007, 18% in 2008, and 8.4% in 2009 for some customers, and in New Mexico, some customers faced annual increases of more than 20% since 2007.  At the time of these increases, HCSC's surplus grew from $6.1 billion in 2007 to $6.7 billion in 2009, up from $4.3 billion just four years earlier in 2005.  The company's surplus is five times the minimum required for solvency protection.” 

While Consumers Union notes that some states have begun to reject rate increased amidst such huge surpluses, the organization urges the rest to begin to, “…examine these surpluses, develop appropriate ranges for minimum and maximum surplus, and disapprove or reduce rate increases, particularly on individual market plans, when the company has more surplus than is necessary for solvency protection.”

They go on to recommend, “…policymakers, insurers, consumer advocates and other industry participants should reexamine the purpose of surplus and the formulas for establishing each insurer's appropriate surplus requirements.  Minimum and maximum ranges of appropriate surplus should be developed for insurers based on prevailing and projected risks and other appropriate factors, including affordability for consumers.”