Washington Nonprofit Health Insurers Reach Record Surpluses

Two nonprofit health insurers in Washington State have accumulated record surpluses of more than $1 billion, causing the state's insurance commissioner to sound the alarm.

According to the most recent quarterly filings with office of the insurance commissioner, Premera Blue Cross has a surplus of $1,015,692,693, while Regence BlueShield's surplus reached $1,048,103,555. The insurers are two of the largest in the state.

In a press release, Insurance Commissioner Mike Kreidler blasted the surpluses, saying “At a time when people are paying more for their health premiums and getting less, these companies have stockpiled huge assets."

Kreidler has proposed legislation in the past to consider surpluses when reviewing rates. Current state law requires the insurance commissioner's office to ignore them when going over proposed premiums from insurers. The most recent attempt at changing this law was Substitute Senate Bill 5247, which failed to come out of the Senate Rules Committee earlier in the year. Kreidler says he intends pursue this legislation again next year.

“Families are clearly struggling to afford insurance,” said Kreidler. “More than a million Washingtonians have no health coverage at all. Yet very few people know how much these nonprofit health insurers are sitting on.” Kreidler went on to dismiss some insurers' claims that these surpluses are actually reserves, saying that the money is "above and beyond" what the company has set aside.

In a statement, Regence BlueShield defended its surpluses, saying they are needed as a safety net to protect its members against unknown risks and costs. Premera Blue Cross spokesman Eric Earling gave a similar reason, reasoning that the money is needed to pay claims and invest in new technology. He also reasoned that the money is needed since nonprofit health plans don’t have access to equity markets or other forms of capital.

“It’s ironic [Kreidler] is continuing to advocate that idea given that all three local health plans in Washington lost money in the individual market in 2011. Meaning, they’re already drawing on reserves to balance those losses,” said Earling.

Both Premera Blue Cross and Regence BlueShield have seen their surpluses grow since 2000. Regence had a surplus of close to $400 million that year, while Premera had nearly $300 million.

Nonprofit Insurer Gets Federal Loans

A national membership group of independent workers was awarded federal loans, setting the stage for a new nonprofit insurer.

The Register-Guard reported today that the Freelancers Union was awarded $59.48 million in low and no-interest federal loans on Tuesday.  This money was used to create a nonprofit, consumer-run health insurance plan in Oregon.  The Union was also awarded loans to set up similar plans in New York and New Jersey, and other organizations were given the green light to set up programs in Montana, Iowa, Nebraska, New Mexico, and Wisconsin.

The new insurer will be run as a Consumer Oriented and Operated Plan (CO-OP), a new plan for individuals and small businesses that was created by the Affordable Care Act of 2010.  According to Freelancers Union founder and executive director Sara Horowitz, the CO-OP will be open to all Oregonians, not just members of the Union (though members will get access first).  Customers will be able to join the plan in October 2013, with benefits becoming available in January 2014.  Horowitz told The Register that she anticipates the program will insure 35,000 workers after five years.

The CO-OP plans to give its members insurance through a partnership with Providence Health & Services, a Catholic-sponsored health care system in Oregon that also operates in Alaska, California, Montana, and Washington.  The cost of the plan is yet to be determined.

This is not the first time the Freelancers Union has dabbled in nonprofit healthcare.  In 2009, the organization founded the Freelancers Insurance Co., which provides health insurance to over 23,000 New York Union members and their families.  The insurance costs about a third less than the average plans on the individual market.

You can read more about this story in The Register-Guard.

MA Attorney General Blasts Pay of Nonprofit Directors

Note: This is a summary/reaction of a news story originally posted by an outside organization.  To read the original article, follow the links in this post.

Back in March, we posted a story about nonprofit health insurers in Massachusetts coming under fire for what was viewed as excessive pay for their board members and executives.  Now, the Attorney General of Massahussetts, Martha Coakley, has stated her intention to file legislation to make it illegal for public charities to pay their director's; this according to Bloomberg BusinessWeek.

Coakley made the decision to move on this after her office conducted a review about this type of compensation, and subsequently found their was no justification for it to continue.  Executive compensation has been a sore subject for many Americans in the wake of the Great Recession and Bank Bailouts, but the compensation that these health insurers were getting were particularly outrageous to MA residents as health care costs soared in the state.  These organizations receive tax benefits in addition to the other advantages non profits get, so Coakley saw even more reasons for this pay trend to continue.

Although the insurers defended the pay by saying that their boards dealt with very complicated issues, and needed to be compensated appropriately for their time.  However, Coakley said that her review found no evidence of this, and that unpaid boards at nonprofit hospitals dealt with the same issues. 

Obviously, this legislation is going to be met with stiff resistance from these non profit health insurers, and it remains to be seen whether it has the votes to make it through the Massachusetts State Senate.  We will certainly have an update on this law if we hear any more news about it.

Read the original article about this story at Bloomberg BusinessWeek.