March 11, 2012; Source: Grand Forks Herald
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NPQ has long been following the issue of the size of reserves held by nonprofit health insurers. In many states, these reserves have been growing uncapped while health insurance rates have seen steady and sharp increases. Now, a bipartisan group of legislators in Minnesota, including former GOP presidential candidate Rep. Michele Bachmann (R-Minn.), is calling for a look at the steady growth in reserves at the state’s four biggest nonprofit health insurance organizations: Blue Cross and Blue Shield of Minnesota, HealthPartners, Medica and UCare.
The insurers are required by regulators to have 200 percent of risk-based capital to cushion them against insolvency but, as was mentioned, there is often no ceiling on reserves in place, leading some to criticize the insurers for stockpiling cash while health insurance rates for consumers are priced increasingly out of reach. In 2010, Minnesota’s four large nonprofit insurers had $2.48 billion on hand in their collective reserves, which amounts to 600 percent of risk-based capital. The 200 percent standard would amount to more like $800 million. Apparently, the levels of these reserves have been increasing steadily since a cap on them was removed in 2004. Carl McDonald, a financial analyst with Citi Investment Research & Analytics, found that, at the end of 2010, the Blue Cross plans had average reserves at 942 percent of risk-based capital.–Ruth McCambridge