A report from Consumers Union, the not-for-profit publisher of Consumer Reports, says certain Blue Cross Blue Shield plans have set aside billions of dollars in surplus over the past decade. These plans are using the surpluses — mandated to ensure the payment of all medical claims — to fund business expansion and new products, according to the report.
These surplus funds are primarily built through premiums. The surplus can be used to moderate any premium increases, but Consumers Union found that some financially strong BCBS plans with large surpluses have continued to seek double-digit rate increases. The report cited Blue Cross Blue Shield of Arizona, which raised its individual market customers’ premiums between 14.5 percent and 19.4 percent in 2007, 13.1 percent and 15 percent in 2008, and 8.8 percent and 18.4 percent in 2009. That plan’s surplus grew from $648.3 million to $717.1 million, more than seven times the amount that regulators consider to be the minimum necessary for solvency protection.
One out of three Americans with private insurance coverage is insured by a Blue Cross Blue Shield plan, according to the report “How Much Is Too Much?”
“Non-profit Blue Cross Blue Shield plans maintain the appropriate reserves to provide a critical safety net to our members,” says Bob Kolodgy, chief financial officer at the Blue Cross and Blue Shield Association, “enabling them to ensure coverage now and in the future, in good times and during those of unanticipated disasters.”
The report says 7 out of 10 plans held more than three times the amount of surplus that regulators consider the minimum needed for solvency protection.
“Because non-profit BCBS plans lack access to capital markets available to other companies, we rely on our own reserves to make the investments needed to increase efficiency and develop capabilities that help us better respond to increasing medical costs — a key driver of rising premiums,” says Kolodgy.