Nonprofit Blues Plans Have Amassed Huge Surpluses: Report

In the last decade, nonprofit Blue Cross and Blue Shield (BCBS) plans have set aside billions of dollars in surplus, even as they raised rates for many customers, according to a widely publicized report issued by the nonprofit group Consumers Union. Nonprofit BCBS plans, including community-owned charitable plans and subscriber-owned mutual plans, held more than $32 billion in surplus at the end of 2008.

In researchers’ sampling of 10 nonprofit BCBS plans, seven held more than three times the amount of surplus that regulators consider to be the minimum amount needed for solvency protection. For example, BCBS of Arizona has surplus more than seven times the regulatory minimum as of the end of 2009. Health Care Service Corporation, a mutual insurer doing business as BCBS of Texas, Illinois, New Mexico and Oklahoma, has five times the regulatory minimum. Meanwhile, over the past three years both insurers continued to raise their rates.

The report calls on state insurance regulators to scrutinize surpluses when considering rate increases and set maximum limits for surpluses. 

7 Things You Need to Know About Managed Care in 2010

via Corporate Research Group’s Weblog by Carl Mercurio on 12/17/09

Shameless promotion time.  We’ll be releasing the 18th annual edition of our Outlook for Managed Care next month, our best-selling report.  This year’s 100-page edition includes a special section on the “7 Things You Need to Know About Managed Care in 2010.”  Here’s a taste.

1. Strategy: Cigna, Humana and United are just three health plans that have announced a new strategic emphasis for a post-reform world.  But will these new strategies move the needle in any considerable way?  Hint: No.

2. Individual: Reform will boost membership but strain margins – with Blue Cross Blue Shield plans most at risk.

3. Medicaid: Plans will struggle with a growing but changing membership mix that includes childless adults suffering from a variety of untreated conditions and lacking complete medical histories.  Bottom line: More members, strained margins, market exits.

4. Medicare: The real impact of reform on various Medicaid Advantage offerings will be as follows: really bad for PFFS and special needs plans, and a toss-up for HMOs.  Meanwhile things will be at least O.K. — perhaps even very good — for Medicare PPOs and group.

5. Prospects: Despite the rhetoric that managed care will enjoy some kind of big windfall from reform, we just don’t see it playing out that way long-term — which is one reason why shares in these companies are trading at all-time low multiples.

6. The Big Picture: It will be difficult to remember that managed care is a struggling industry when the underwriting cycle turns up, boosting industry profits.  That’s especially true as the up-cycle will likely gain momentum coincident with rollout of the initial elements of reform — masking longer-term challenges such as the erosion of the industry’s lucrative fully funded business lines.

7. Consumer-Directed Healthcare: An important year as CDHPs test whether they will ever be more than a niche product for the relatively healthy and wealthy.  We continue to see niche status for this line, but you never know.