It’s Time to Hold the Line on Insurance Rates
On July 22, the Tennessean ran a news story about a Consumers Union report that revealed that health insurance companies were stockpiling large amounts of cash while raising premiums. One of the companies highlighted was Blue Cross Blue Shield of Tennessee.
This week, the Tennessean asked for TNCA’s comment:
Last week, Consumers Union, the nonprofit publisher of Consumer Reports and an independent organization whose mission is to help consumers distinguish advertising hype from fact, reported that BlueCross BlueShield, the company that holds close to 50 percent of the health insurance marketplace in Tennessee, had set aside billions of dollars in surplus while raising premiums much more than reasonably necessary.
A surplus is defined as the excess of an insurance company’s assets over liabilities. How do we know it was more than reasonably necessary? The insurance industry tells us so. In the early 1990s, safeguards were put in place by the National Association of Insurance Commissioners to guard against the insolvency of insurance plans. The numbers needed to meet the safeguard requirements, which were developed in consultation with actuarial professionals, have been met and, in the case of BlueCross BlueShield of Tennessee, obscenely exceeded.
There are different levels that trigger different actions, but the basic rate of capital surplus required before any regulatory action that would guard against insurance agency insolvency is taken is 200 percent. For the past decade, BlueCross has carried an average of 1,012 percent, more than five times the amount of surplus that regulators consider necessary. Last year alone, they amassed $1.1 billion in surplus cash. The arguments for carrying such a surplus include the red herring that it’s a necessary safety net at a time when there is uncertainty about how insurance costs will change under the new federal health law.
While we can all agree that carrying a good-sized surplus is crucial to both the health of the business and the protection of the consumer, the question that has been asked but remains unanswered is, with such a large surplus, are the inevitable rate hikes really necessary? Of course, the answer is no.
Maintaining current rates will not adversely affect BlueCross, and since the company has stockpiled millions in the past decade alone by issuing unreasonable rate hikes on not only the average consumer but on those with pre-existing conditions, it’s about time they do.
Ideally, however, BlueCross should use a portion of the surplus to reduce premiums, boost coverage for those who are underinsured or extend coverage to those who have been denied coverage in the past.
Skyrocketing insurance premiums are contributing to the current economic crisis, and the burden of either finding the money to meet monthly payments or knowing that if they get hurt on the job they are solely responsible for potentially thousands in medical bills weighs heavily on Tennessee families. Insurance rates in Tennessee have risen 62 percent in just seven years, from 2000 to 2007.
The windfall of profits produced by this unchecked overburdening of vulnerable consumers has allowed BlueCross to stockpile millions — and even if rates stay static, they will continue to profit. For BlueCross BlueShield of Tennessee, a surplus of 1,000 percent is more than enough to satisfy regulators and allow insurance premiums to remain the same.
Read the original at Tennessean.com.