BlueCross BlueShield Association Plans Lower Premium Rate Increases in 2004
Facing "political pressure" after a "banner 2003," not-for-profit Blue Cross and Blue Shield companies are lowering their health care premium rate increases this year, which has contributed to a "wider slowdown" in health premium rate increases for some employers and consumers, the Wall Street Journal reports. In 2003, earnings for BCBS plans -- which "dominate the market" in 35 states and insure about 33% of U.S. residents with health coverage -- more than doubled because of premium rate increases between 10% to 16% and stock-market gains on invested capital, the Journal reports. Using the 2003 earnings, BCBS plans were able to increase total reserves by about 33% to $31.9 billion last year; insurers use reserves to pay claims during catastrophic events or to finance new products or investments. However, the increased earnings and reserves have increased political pressure on the BCBS plans "at a time when health care costs are approaching crisis levels for many employers and squeezing the wallets of consumers," the Journal reports.
Lawmakers and regulators in North Carolina, Rhode Island, Pennsylvania and other states are demanding that BCBS plans in their states lower premium increases or give rebates to consumers to decrease their surplus reserves. In addition, some lawmakers and regulators are seeking caps on reserves and increased control over premium rate increases. According to the Journal, a "wave of such legislation" could have a "longer-lasting impact on premium prices." Officials for BCBS plans are "[e]ager to deflect public criticism," and many plans have lowered premium rate increases, offered rebates or reduced premiums.
The Journal also reports that more plans are requiring participants to pay higher deductibles and copayments, which could leave BCBS plans with reserves at the end of 2004 that "are still too high in the eyes of regulators." However, officials for BCBS plans say that unlike for-profit health insurers, their reserves in "good years" are all they have to protect their viability in "bad years" or catastrophic events. "These things tend to even out," Bob Greczyn, chief executive of Blue Cross and Blue Shield of North Carolina, said. He added that although his company's reserves increased by 52% to $743 million in 2003, they were enough to cover 3.7 months of estimated claims and operating expenses; state law requires the carrier to hold reserves of between three months and six months (Fuhrmans, Wall Street Journal, 6/21).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.