Editorial: Surpluses should count in health insurance

If Washington lawmakers raised taxes when the state had accumulated a $2 billion rainy day fund, taxpayers would not take it well.

Yet, as consumers, they have sat quietly by while the state’s two largest health insurers, Premera Blue Cross and Regence Blue Shield, have each compiled $1 billion in surpluses, on top of the combined $1 billion they have in reserves. Those surpluses have tripled in the last decade.

The Group Health Cooperative surplus is about $448 million.

Meanwhile, premiums have continued to increase, as has the number of uninsured as individuals and small businesses have dropped coverage. More than 1 million Washington residents have no insurance, but they continue to get health care at clinics or emergency rooms. If they cannot pay their bills, the costs are borne by those who do pay.

Insurance Commissioner Mike Kreidler estimates a family of four with insurance pays an extra $1,000 in insurance premiums to cover those unpaid bills.

Reserves are necessary for the payment of claims. Earnings from investing surpluses help mitigate rate increases. Some insurance plans operate with losses that investment returns offset. But how much is enough, and how much is too much?

Kreidler’s office reviews insurance company rate filings and can deny those deemed excessive. But Washington law prohibits the commissioner from including the surpluses when considering increases. He has tried for three years to get the law changed. This year the effort was stymied in the House Rules Committee.

The companies say the money in their coffers equates to about three months in claims. Until the U.S. Supreme Court hands down its decision on “Obamacare,” they add, there is no telling what they might have to absorb in new costs as hundreds of thousands of the uninsured – not the healthiest of populations – start buying policies and filing claims. As if, as Kreidler pointed out, they were not absorbing those costs indirectly now.

And there’s always that chance an unanticipated event or contagion would send costs through the emergency room roof.

They also say that drawing down surpluses to freeze or roll back premiums would send false signals to consumers about the cost of medical care. But what signals are there today, and who heeds them if they are sick?

Consumers do understand insurance rate increases, and they drop policies accordingly.

With the country holding its breath until the Supreme Court rules and the insurers determining how they will respond, surpluses will not be uppermost in the minds of voters as they get their primary ballots in a little more than five weeks. If health care reform goes forward, they might want to consider how competitive the Washington insurance marketplace will be if the resident companies do use the surpluses to lower rates – and keep new players out of the market.

That $2.4 billion surplus is their money. It should at least count in ratemaking.