Not-for-Profit Health Insurers: Surplus and Community Benefits
Background Information
October 8, 2008

Michigan 
Blue Cross Blue Shield, a nonprofit insurer of last resort, requested an increase in its rates by an average of 24 percent (42 percent for some policies) in 2006. Consumers, who were represented by a private attorney, challenged the proposed rate increase. In 2008, Michigan Attorney General Mike Cox sided with consumers, and a hearing officer determined that the rate increase was excessive, citing Blue Cross’s $2.4 billion surplus. In August 2008, the insurance commissioner overturned this proposed decision and approved the rate increase. The commissioner’s decision is now being appealed by attorney Joseph Aoun on behalf of consumers.

Testimony of Attorney General Mike Cox (February 6, 2008)

Judge Rules against Blue Cross on Rate Hikes (May 15, 2008)

Commissioner’s Final Decision in the Matter of Blue Cross Blue Shield of Michigan’s Application for Rate Increases for Nongroup Coverage (July 11, 2008)

Livonia Couple Appealing Blue Cross Hikes (September 9, 2008)

Colorado
Kaiser Permanente reached an agreement with the state of Colorado to provide $155 million in the form of premium credits or enhanced benefits to employers and individual consumers after the state’s insurance commissioner raised concerns about Kaiser’s increasing net worth reaching several hundred million dollars. 

Commissioner of Insurance and Kaiser Permanente Enter Agreement to Provide $155 Million for Colorado Consumers (June 24, 2008)

Pennsylvania 
In 2005, Pennsylvania reached an agreement with the state’s four Blue Cross Blue Shield Plans, committing them to contribute a percentage of their annual health care premiums toward community health programs. Under the agreement, 60 percent of the funds allocated are to provide health insurance to low-income people through state-approved programs, while the remaining funds are to go toward other publicly sanctioned health coverage programs or community benefit initiatives. Now, as several Blue Cross Blue Shield plans propose to merge, issues of surplus are on the table again.

The Pennsylvania Community Health Reinvestment Agreement: Establishing Non-Profit Insurers’ Community Benefit Obligations (August 2006)

October 2003 Amici brief, Ciamaichelo v. Independence Blue Cross litigation, about Pennsylvania Blue Cross Plans' surplus and charitable obligations

September 2004, IMR Economics, Report to the Insurance Commissioner about Blue Cross plans' reserves and surplus

October 2004, Comments of several consumer groups to the Pennsylvania Insurance Department on Blues Cross plans' reserves and surplus

July 2008, Community Legal Services and Pennsylvania Health Law Project statement opposing merger of Highmark and Independence Blue Cross

District of Columbia
Councilmember Mary Cheh has introduced legislation that would require the DC Mayor to determine the percentage of annual revenues that “hospital and medical services corporations” must spend on community health reinvestment. It would also require the mayor to establish a sufficient surplus operating range for such companies. Further, companies that accumulate a surplus in excess of the upper limit would need to justify such actions or divest that excess through community health investment.

Medical Insurance Empowerment Amendment Act of 2008

CareFirst: Meeting Its Charitable Obligation to Citizens of the National Capital Area (DC Appleseed Center, December 2004)

CareFirst Blue Cross Blue Shield Reform Project (DC Appleseed Center)

For a variety of publications available from the DC Appleseed Center, click here.

Rhode Island
In 2006, Rhode Island commissioned the Lewin Group to study the reserves of three of its largest insurers. The Lewin Group concluded that one of the state’s insurers had excess reserves, while the other two insurers were deemed to be slightly under-reserved. Since then, the Rhode Island Insurance Commissioner has repeatedly reduced the requested rate increases sought by two of its health plans, Blue Cross Blue Shield and UnitedHealthcare, citing that the requests cannot be justified against the insurers’ obligation to work toward more affordable health insurance.

For information regarding the power given to the Rhode Island Insurance Commissioner, see Rhode Island General Laws Sections 42-14.5-3(b) and 27.13.1-1, available online here.

For information about orders and decisions filed by the Rhode Island Office of the Health Insurance Commissioner, click here.

For the most recent news on rate increase requests and for information about the 2006 reserves study, click here.