Kaiser and Blue Cross Excess Reserves Enough

SANTA MONICA, Calif., May 18 /U.S. Newswire/ -- Documents filed by state health plans this week show that the two largest and most profitable insurers, Kaiser and Blue Cross, have enough excess reserves to pay for health insurance for half of the state's uninsured residents for an entire year, according to the Foundation for Taxpayer and Consumer Rights (FTCR). Blue Cross is currently under investigation by state regulators for dramatically raising rates following a recent merger, and FTCR called on the Attorney General today to investigate Kaiser's non-profit status given that the company is holding such excessive reserves.



"It is standard practice for insurers to wallow in huge cash reserves to please their Wall Street bosses and deep pocket investors. Blue Cross' and Kaiser's excessive reserves and unnecessary premium increases are symptomatic of an unregulated and uncompetitive health care market," said Jerry Flanagan of FTCR. "Regulators should require all health insurers to justify their overhead costs and premium increases like auto and home insurers already do."



Blue Cross and Kaiser have a combined excess reserve, known as Tangible Net Equity (TNE), of nearly $11 billion. State law allows the California Department of Managed Health Care (DMHC) to require that a health plan maintain a minimum level of reserve (to ensure the company will remain solvent), but the department currently has no authority to cap the upper amount. FTCR called on DMHC to adopt new rules requiring companies to justify overhead costs including reserves and to provide refunds to patients for excessive rate increases.



The analysis by FTCR reviewed quarter filings of California's 7 largest health plans (Cigna, Aetna, Blue Cross, Kaiser, Blue Shield, PacifiCare, and Health Net) which provide health coverage for over 80 percent of the privately insured market in California. The analysis is available at http://www.consumerwatchdog.org/healthcare/rp/rp005056.pdf



Estimating that the cost of insuring an individual for one year to be $3000, the combined Blue Cross and Kaiser excess reserve is sufficient to provide coverage for 52 percent, or 3,648,611, of the state's approximately 7 million uninsured for an entire year.



The two non-profit health plans among the big 7, Kaiser and Blue Shield, currently have reserves 13 and 5 times, respectively, their required levels. Kaiser has the largest reserve of all state health plans -- $9.5 billion more than the required amount.



"Attorney General Bill Lockyer should investigate Kaiser and Blue Shield and consider revoking their special tax status unless the companies start behaving more like non-profits," said Flanagan.



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