Insurance rate hikes with $2.4 billion cash surplus?

The surplus of nonprofit health-insurance companies should be considered in granting future rate hikes in Washington state.

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When nonprofit health-insurance companies operating in Washington state want to raise rates they must get approval from state Insurance Commissioner Mike Kreidler.

Over the past 10 years, as medical costs have increased, the biggest three nonprofits have been granted increases. Group Health has boosted rates 122 percent, Regence 150 percent and Premera more than 200 percent.

But now it's come out that the Big Three have amassed a surplus of $2.4 billion. Hmmm, so much for nonprofit.

Kreidler, too, has raised his eyebrows. The insurance commissioner is asking the Legislature to give him the power to consider a nonprofit insurance company's cash surplus when a rate increase has been requested.

Kreidler is 150 percent correct. Oh, what the heck, let's make that 200 percent correct.

It is absolutely outrageous three companies were able to amass $2.4 billion in this state alone.

Officials of the companies say all the extra cash is needed to protect their financial health in the face of unexpected costs, particularly those that result from the federal health care overhaul, and to invest in new systems, according to The Seattle Times.

Kreidler said the insurers now have at least $1 billion more than they need to pay claims and meet contingencies. That surplus right now is big enough to cover their expenses for up to five months, according to the Washington State Wire news service. And that's on top of a legal requirement they maintain a two-month reserve. Kreidler believes a three-month surplus is about right.

"We are all the stockholders for not-for-profits," Kreidler told lawmakers as he pitched the plan to allow him to consider the surplus in regard to a rate hike.

When Oregon passed a similar law in 2009, Regence's surplus resulted in Oregon's insurance commissioner cutting the requested 22.1 percent rate hike to 12.8 percent. That rate resulted in the company operating at a loss for the year but the deficit was made up by the surplus.

Insurance company officials don't believe it's right for government to force it to operate at a loss.

Generally, we would agree. But when there is a mountain of cash in reserve and the insurance companies are nonprofit, the action is justified. Think of it as a rebate to customers for being overcharged.

The Legislature should grant the Insurance Commissioner's Office the power to consider surplus cash -- profit -- in the rate-hike equation.

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