SEATTLE — Two of the largest nonprofit health insurers in Washington state are sitting on record surpluses at a time when policyholders are paying more for their insurance premiums, the state’s insurance commissioner said.
Premera Blue Cross and Regence BlueShield each now have surpluses of more than $1 billion, according to their most recent filings for the three months that ended in March. That’s more than what the companies are required to set aside in reserves, Insurance Commissioner Mike Kreidler said Monday.
“They’re building up a financial cushion for themselves, and it comes at an expense for people,” Kreidler said, adding that insurers should use some of that surplus money to reduce rate increases for policyholders. “These aren’t reserves, they’re financial surpluses.”
He noted that the cost of individual health policies in Washington more than doubled between 2005 and 2011.
Eric Earling, a spokesman for Premera Blue Cross, said the surplus money is needed to ensure the company can pay claims and invest in new technology and service capabilities. Unlike private insurers, not-for-profit ones can’t sell stock or bonds to raise capital, so they need to set aside money, he added.
The reserves also are critical now to manage increased costs caused by federal health reform, he added. Premera has 1.5 million members in Washington and Alaska, and the money amounts to about $700 per member, Earling said.
In a statement, Regence BlueShield said its capital reserves provide a safety net for members against unknown risks and costs, and money needed to finance initiatives. Using such money to buy down rates promotes a false impression of reducing health care costs; the cost of health insurance goes up because medical costs go up, the company said.
Kreidler has been pushing to change state law so the insurance commissioner can take into account the size of insurers’ surpluses when considering whether to approve or deny premium rate hikes for individual and small group plans. Eleven states, including Oregon, give their insurance commissioners that authority, he said.
A Senate bill that would have given Kreidler that authority did not get a floor vote during the legislative session earlier this year. Insurers testified against the measure, saying carriers need to be financially strong in light of changes and uncertainties associated with federal health care reforms.
Kreidler said he plans to push similar legislation next year.