Large health insurer surpluses could help ease premiums

Imagine if the state of Washington had a $2.2 billion budget surplus.

Suddenly the challenge of keeping parks open, protecting our most vulnerable citizens, ensuring higher education is affordable and investing new money into K-12 education would not seem so insurmountable, would it?

Now consider this little-known fact: Two of this state’s largest insurers – Premera Blue Cross and Regence BlueShield – are sitting on surpluses totaling $2.2 billion. In fact, their surpluses grew almost a quarter-billion dollars in the first nine months of 2012 alone.

As the state’s insurance regulator, I review insurance premiums. If they’re unjustifiably high, I tell companies they cannot charge that much. This is a critical protection for Washington consumers.

But here’s the elephant in the room: Under current law, I am barred from taking those surpluses into account when I review rates. This is despite the fact that regulators in nearly a dozen other states, including Oregon, have the authority to do so.

To me, it’s increasingly hard to square the fact that families are struggling to afford health coverage at the same time that major insurers are stockpiling huge surpluses. This is why I am, again, seeking the statutory authority to take health insurers’ surpluses into account when I review rates. State Rep. Laurie Jinkins, D-Tacoma, is the prime sponsor of House Bill 1349.

The legislation is quite simple. For individual and small-business coverage, I would “review the carrier’s surplus levels as an element in determining the reasonableness of the proposed rate.”

When I first proposed this several years ago, insurers protested, saying that the large surpluses were needed for bird flu or some other pandemic. They now point instead to health care reform. But health insurers in Washington stand to add hundreds of thousands of new, paying customers under health care reform.

For years, I’ve asked health insurers how much is enough when it comes to their surpluses. They were asked again at a Feb. 8 legislative hearing. There seems to be no such thing as enough, based on their replies.

Make no mistake, insurers have to be in good financial shape. No one knows that more than I, since it’s my office that tries to rehabilitate insolvent insurers. Fortunately, that’s an extremely rare event.

The companies affected by this bill are financially healthy. They have hundreds of millions of dollars in reserves set aside. Surplus is in addition to those reserves.

I do worry, however, about the financial health of consumers struggling to afford health coverage. What are their “surpluses?”

I am also concerned about the solvency of health care providers who see their insurance reimbursements decline while insurer surpluses soar.

Finally, I am concerned about further attempts for nonprofit insurers to turn for-profit. Those cash stockpiles could then be converted into shareholder dividends and executive bonuses. I have already rebuffed one insurer’s effort to convert to for-profit status, but I worry that the bigger the surpluses, the greater the temptation for insurers to try again.

By factoring surpluses into rate reviews, I can help protect consumers from sticker shock in their health care premiums, while still ensuring that carriers are financially healthy. It would be a tragedy – both for the economy and for individuals – if lawmakers chose to put the interests of insurance companies ahead of their constituents.

Mike Kreidler, a former state legislator and member of Congress, is serving his fourth term as Washington’s insurance commissioner.