March 13, 2011; Source: The Denver Post | Last week NPQ continued to cover the story about the $11.3 million severance package given a former executive of Blue Cross of Massachusetts and the large payments going to board members of that organization. Meanwhile, stories about nonprofit insurers in other parts of the country are heating up.
In Colorado, Kaiser Permanente and Rocky Mountain Health Plans have built up enormous reserves even while raising premiums. All nonprofit insurers are required by state regulations to keep a minimum in reserves to cover themselves but in many states there is no maximum. In Michigan the maximum is set at 1000 percent of the minimum required, and in Pennsylvania the state says no more than 750 percent of the minimum should be kept aside.
But in Colorado, Rocky Mountain HMO now boasts $110 million in reserves, which is approximately 1,743 percent of the required minimum, and Kaiser ended last year with $666 million – a more restrained 1,287 percent of the required minimum.
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This is not the first time that Colorado has seen excessive reserves. In 2008 the state required Kaiser to spend some of its reserves to benefit consumers, but now its reserves have risen to three times the size they were then.
Pennsylvania, Maryland, Rhode Island, and the District of Columbia have rejected rate increases or called for community spending when surpluses have gotten too high. Colorado State Sen. Morgan Carroll, who sponsored a bill in 2008 directing insurance regulators to consider everything from executive pay to surplus levels when approving annual premium requests says, "An excessive and continually growing surplus is a good indicator that insurance rates should actually be decreased." Amen!—Ruth McCambridge