Companies sitting on surplus dollars while rates go up

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By Consumers Union on Thursday, July 22nd, 2010

Consumers Union took a close look at ten nonprofit health plans in our latest report “How much is too much.” We found that nonprofit Blue Cross and Blue Shield (BCBS) health insurers set aside billions of dollars in surplus – essentially retained profits – even as they raised premiums for consumers by as high as 20 percent annually. Click here for PDF.

Blue Cross Blue Shield is a household name for most Americans. Since the 1920s, Americans have accessed health insurance through non-profit BCBS plans. Today the brand touts itself as “the largest health benefits provider in America, serving nearly 100 million people in all regions of the country.”

Times have changed. Many of the individual BCBS companies have switched to for-profit status, while even the nonprofits appear to be putting profits before policyholders. Our new report looks at the hoards of surplus dollars sitting in BCBS plans while policyholders struggle with big rate increases and reduced benefits.

Says Betsy Imholz, Director of Special Projects in our West Coast Office:

“Maintaining a healthy surplus is absolutely critical, but this is just too much. These companies know that every time they raise rates, some people simply won’t be able to keep their insurance anymore. People lose coverage and maybe access to needed medical care. If you are sitting on piles of excess surplus, then you should use some of it to make sure your policyholders can afford their insurance.”

Add this to your handy list of reasons to be outraged at insurance companies. Taking just a few examples from the report, research showed that in Arizona BCBS hit consumers with double digit rate increases in 2007, 2008 and 2009 while increasing their surplus to $717.1 million, more than seven times the amount that states typically require to protect against insolvency. Healthcare Services Corporation seems to be flush as well, but wasn’t shy about raising rates in Texas, Illinois and New Mexico.

What’s worse is during the time these non-profit BCBS plans were raising rates and stockpiling record surpluses, families with Blue Cross coverage wrote into us describing unrelenting premium increases. We heard from Bonnie, in South Wilmington, Illinois, who says that her BCBS health insurance now eats up one-fifth of her monthly salary. For some folks, like James of Oak Forrest, Illinois, these premium increases have forced them to cut benefits.

The report highlights much of the abuse but we’re definitely not done yet. Have you had a major health insurance rate increase? Tell us your story so we can hold companies accountable for the rates they charge in light of the surpluses they keep.

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