Surplus profits should be factored into insurance-rate decisions
The Seattle Times editorial board endorses Senate Bill 5427, which would give Washington Insurance Commissioner Mike Kreidler the power to consider the surplus profits of non-for-profit health insurers when regulating their rates for the individual insurance market.
Seattle Times Editorial
SENATE Bill 5247 concerns the profits of not-for-profit health insurers in Washington. These companies — Regence, Premera and Group Health — have no owners to pay, but they do make profits, keep them and use them.
SB 5247, sponsored by state Sen. Steve Conway, D-Tacoma, would empower the insurance commissioner to take into account a category of retained profit when approving rate increases. We believe the state should have that authority.
Washington's insurance commissioner, Mike Kreidler, a Democrat, can deny rate increases in the individual and small-group markets if he thinks they are unreasonable for what the consumer gets. He cannot look at how much money the companies have.
An insurance company's reserves are the amount it needs to cover its expected claims. Its surplus is the amount above that. It is a cushion. At a hearing in Olympia Monday, Kreidler said the big three are sitting on $2.4 billion of surplus, which in his opinion is "at least a billion" more cushion than they need for commercial comfort.
Some of that money comes from the large-group market, which Kreidler does not regulate. But some is from the individual and small-group markets, which he does regulate. And during the past six years, in which surpluses have swelled, rates in the individual market have more than doubled.
Premera's reply was that the companies face uncertainty: Federal health-insurance reform will require companies to insure hundreds of thousands more Washingtonians with richer benefits than many people have now, and the companies may need every dollar they have. SB 5247 conveys an open-ended, discretionary power.
In the hands of a vindictive insurance commissioner, such a power could be dangerous to the companies' health. Kreidler is not that sort of insurance commissioner.
He told legislators his intention is not to shrink the surpluses, but merely to stop them from growing. If he had this power, he said, individual and small-group consumers would still see the cost of health insurance go up, but not as fast.
We believe Kreidler should have this power and use it judiciously.