Health insurer surplus should be limited
The Seattle Times editorial board supports Insurance Commissioner Mike Kreidler's idea of limiting the surplus of not-for-profit health insurers, with some reservations.
MIKE Kreidler, insurance commissioner, is asking the Legislature to renew and increase his authority over the individual market for health insurance in Washington. We support the idea.
Kreidler's proposal directly concerns three companies: Premera, Regence BlueShield and Group Health. All are not-for-profit, meaning they are set up for a social purpose and have no owners to pay. To remain safe and solid, all need to accumulate profit. The question is how much.
The companies' holdings, net of what they owe, are their surplus. For the three companies combined, the surplus has increased to more than $2 billion.
Kreidler wants the power to reject rate increases if a company's surplus is greater than three months of claims. The current amount is more than four and a half months of claims.
No institution wants to weaken itself — and none of the three likes Kreidler's idea. They remind us that the surplus exists in case of disaster: a contagion, an eruption or a terrorist's bomb.
Regence, which has the fattest cushion — more than five months of claims — says its surplus is $1,200 per member — about the cost of one visit to the emergency room.
Grant that. Still, $2 billion is a lot of money for three local institutions, especially for ones whose purpose is social.
Kreidler's proposal does have a problem. He is asking for power to deny rate increases in specific lines of business, and proposes to use a financial limit — surplus — descriptive of a whole company. If the company is in surplus but the line of business is in the red, the effect may be to kill that line off. In 1998 the previous insurance commissioner killed off the individual market for a year — an experience that should not be repeated.
Kreidler's proposal needs to be looked at carefully. We are not sure how to solve the line-of-business problem — nor whether "months of claims" is the right measure, or three the right limit.
And yet, $2 billion is a lot. Maybe too much.
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