Nov 19
Nonprofit Health Insurers Sued Over Excessive Cash Surpluses
The Pennsylvania Supreme Court has allowed lawsuits to proceed that ask the state’s four nonprofit Blue Cross and Blue Shield insurers to use some of their cash surpluses to lower health-insurance premiums. The Supreme Court acted last week on a five-year-old lawsuit against Philadelphia-based Independence Blue Cross, saying that a lower court must decide that suit and three others like it on the basis of whether the size of the surpluses violate state nonprofit law.
The lower Commonwealth Court had dismissed the suit against Independence Blue Cross in 2002 after it agreed with the insurer’s argument that the size of its surplus is the domain of state insurance regulators, not nonprofit law. The lawsuits allege that “health-insurance premiums have skyrocketed while the Blues irresponsibly amassed surpluses far larger than required by the state..”
Based on financial reports at the end of 2005, the four Blues insurers had combined surpluses of $5 billion, a sum of money that they say is necessary to ensure their solvency in an emergency. They also say they invest the surpluses and use the income to blunt rate increases. In 2000, the insurers had combined surpluses of just over $3 billion.
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