Health Insurers Premera, Regence Report Gains in Surplus Cash

Two of the state's three largest health insurers report gains in their surpluses, just as Insurance Commissioner Mike Kreidler continues to argue that the funds those nonprofits have amassed go far beyond what might be needed

Republished courtesy of Kaiser Health News and the Seattle Times

March 12, 2012 -- Two of Washington's three largest health insurers reported gains in surplus cash in their annual reports to the state insurance commissioner, whose bid for authority to consider company surpluses before approving rate increases died in this year's Legislature.

These companies, all nonprofits, refer to the money not earmarked to pay claims as "reserves," and argue it is needed to beef up computer systems, cope with changes in health-insurance laws, and other contingencies.

Insurance Commissioner Mike Kreidler says he wants companies to have reserves for unexpected claims, but argues that what these companies have amassed goes far beyond what might be needed. Unlike for-profit companies, he says, these nonprofits have no shareholders to demand the companies give them dividends or do something else with the money.

According to the reports filed with the insurance commissioner,
Premera Blue Cross made $119 million last year and reported an
increase in surpluses from $879 million in 2010 to $972 million in
2011, nearly 11 percent more.

Regence BlueShield lost $10 million on its insurance business after factoring in investment income and sale of a building for $51 million, but boosted its surplus by nearly 4 percent, from $956 million to $994 million.

Group Health Cooperative lost $14 million, and took $82 million from surplus to fund a pension liability for workers. That helped bring the surplus down from $605 million in 2010 to $482 million in 2011.

Group Health, a health-maintenance organization, not only operates as an insurer but as a provider, employing various types of health-care workers.

All three companies have also lost customers over the past decade.

Group Health experienced the smallest losses, dropping from 444,375 members in 2002 to 356,656 last year, a nearly 20 percent reduction, but that slide appeared to stabilize between 2010 and 2011.

Premera lost 26 percent of its members over the decade that began in 2002 with 912,444, but gained 20 percent from 2010 to 2011, finishing that year with 674,246 members.

Regence lost the most members, going from a high of 1,017,729 members in 2002 to 599,849 last year, a 41 percent drop.

Curt Fackler, a former insurance-commissioner candidate who has been critical of surplus accumulations, notes that the amount of surplus carried by each company per member has grown dramatically for all the nonprofit insurers. In 2002, it was in the $300 to $400 range; by last year, it tripled or nearly quadrupled.

Kreidler said that as more families struggle to pay for health
insurance, "these large and growing surpluses are increasingly

During hearings for the bill, SB5247, insurance-company
representatives argued that their surpluses were necessary to absorb unexpected expenses generated by national health-reform legislation. They also said such legislation would weaken them at a time when for-profit companies are becoming more prevalent across the country.

Even though his bill died this year (in the Senate Rules Committee), Kreidler said the issue isn't going away.

"Consumers are clearly paying more attention to this issue — as they should. And it looks like in most cases, the already-large surpluses are continuing to grow."

Image for this story appears courtesy of Flickr user seiuhealthcare775 under a Creative Commons attribution license.

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Do you think their large reserves will come in handy in 2014, when individual insurance health underwriting is eliminated? --Andrew

Generating/holding excess reserves is simply a means to get more bonus money into the pockets of Regence employees. They can pull it off due to the lack of carrier competition in Washington.

Bonus money for employees...don't you mean bonus money for Mark Ganz and his gang? On the front line employees aren't getting squat! Not only are they frozen in place w/little or no raises each year, there are layoffs up the wazoo. The front line employees are getting what they've always gotten since Mark Ganz took over Regence...less and less w/no appreciation!

The surplus that's described for Regence, is this specifically for Washington or for all 4 states Regence provides insurance in?

Too bad the commissioners office is not adept enough to look at many of the underlying service provider relationships in place with these carriers. For example, the relationship between Premera and Medco is one of the most abusive violations of the public trust within the marketplace. If one has the knowledge to understand how that relationship is structured and the level of revenue sharing between the two organizations being generated because of the level of spread pricing (overcharging members and employers for the cost of drugs) employed, there would be a greater level of understanding of the overall financial methods creating these surplus results. This is not underwriting gain or loss. What is happening in the PBM relationship is a pure revenue play that is anti consumer/anti plan sponsor and a breach of any decorum of transparency and disclosure.