Why are Washington's Nonprofit Health Insurers Sitting on Huge Surpluses?

Guest columnist Mike Kreidler, Washington's insurance commissioner, argues the Legislature should give him the authority to consider insurance companies' surpluses, among them Regence BlueShield, when deciding whether to approve insurance rates.

OPINION – January 18, 2012 – Washington has reached a bleak milestone: The state is now home to more than 1 million people who have no health insurance.

Health-care reform will help dramatically, offering more than 800,000 Washingtonians Medicaid eligibility or subsidies to buy private insurance. But those changes, assuming they happen, won't take effect until 2014. In the meantime, businesses and families across the state struggle to afford health coverage. Many are losing it.
We don't need to sit on our hands and wait. There's a step Washington can take now to help make health insurance more affordable and accessible.
As insurance commissioner, I review insurers' proposed rates. Last year, I asked the Legislature to give my office authority to consider the hundreds of millions of dollars in surpluses that nonprofit insurance carriers have accumulated in recent years, even as they proposed double-digit premium increases.
The bill failed in the face of steep resistance from the insurance industry. I'm not giving up. This issue is my highest legislative priority this year.
We don't need to look far to see an example of such a law. Oregon's insurance regulator already possesses the type of authority that I'm seeking.
To lack this authority is like ignoring the elephant in the room. In Washington, the three major health insurers — Premera Blue Cross, Regence BlueShield and Group Health Cooperative — are sitting on a total of more than $2.4 billion above and beyond what they expect to ever pay out in claims. All of them are not-for-profits. And they continue to propose substantial rate increases.
How much is enough? While reasonable minds might disagree, I argue that once an insurer's surplus exceeds several months of operating costs, it goes beyond reasonableness. After all, where are consumers' "surpluses"? They're struggling to pay their mortgages, their kids' college tuitions and other costs. And insurers' unregulated surpluses are especially jarring in a state that has cut more than $10.5 billion from its own budget, leaving the health-care safety net frayed and in danger of breaking altogether.
Last year, at my request, state lawmakers changed a longstanding law that cloaked health insurer rate requests in secrecy. All the data that insurers file is now public. And in many respects, I think consumers would be pleased with what they find.
They would find, for example, that less of their health-insurance premium is spent on insurance company administrative costs than they likely imagine. Among the health-insurance plans we regulate, the federal health-reform law requires that at least 80 percent of premiums be spent on health-care costs. Unlike in some states, insurers here are generally already meeting that standard.
The health carriers in our state supported the extension of my authority to review their rate requests as an important check-and-balance that serves them as much as the consumer.
Yet while I have appreciated the cooperative spirit of health-insurance carriers in working with my office as we move forward on implementing federal health-care reform, I strongly believe we should not continue to turn a blind eye toward the large surpluses that nonprofit insurers are sitting on.
Nonprofit carriers, particularly, should be held accountable to a larger group of "shareholders" — the general public — than publicly traded, for-profit insurance companies are. Before asking consumers to pay more, these nonprofit carriers should be asked whether they have enough profit already.