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.

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