June 29, 2011; Source: Kaiser Health News | If a prediction from a Wall Street analyst proves true, Blue Cross Blue Shield policyholders may profit nicely from the huge piles of cash these nonprofit health plans have been accumulating in recent years. Analyst Carl McDonald of Citi Investment Research & Analysis, issued a report earlier this week showing that, nationwide, some 33 nonprofit plans are sitting on almost $29 billion in capital reserves, up $18 billion since 2008.
According to Kaiser Health News, the money, "meant as a rainy day cushion – in case the plans face large medical expenses or need to invest in new capital, such as information systems," also could be used to issue rebates to policyholders or for "premium holidays." McDonald writes in his report, "The peak level of profitability that the industry is enjoying right now . . . (has) likely resulted in dozens of conversations in Blue Cross boardrooms across the county about how to deal with their unexpected windfall."
Kaiser Health News notes that Blue Shield of California already announced "it would cap its profits at 2 percent and issue rebates to policyholders." Others might also have to come up with their own plans about what to do with excess cash if they aren't able to meet a new federal requirement to spend at least 80 percent of revenues from premiums on medical care and quality improvements.—Bruce S. Trachtenberg