Mass insurers’ profit/surplus: $2.6 billion

The state issued a slew of reports on health care costs this week, including one on insurance company “surpluses” (pdf)  – the word non-profits use to describe their profit.

 On the one hand, adequate levels of surplus are essential for consumer protection and to meet obligations to health care providers. Surplus allows an insurer to withstand unanticipated  financial losses, such as those caused by health care cost or utilization trends that exceed projections, unanticipated changes in the financial markets or economy, changes in regulatory requirements, or new demands from purchasers. 

 On the other hand, the accumulation of surplus by insurers could also come at the expense of the affordability of health insurance. This is particularly true in Massachusetts, where almost all of the major health insurers are non-profit entities, which means that their surplus is accumulated primarily through underwriting gains generated by premiums paid by their customers or from investment gains, rather than from the issuance of stock or other equities. Thus, while it is important for health insurers to have adequate surplus, health plan members, customers, and the public may assume higher premium costs when surplus levels become too large.

 Eric Linzer, a spokesman for the Massachusetts Association of Health Plans, told the Globe that  the group had not yet seen the report, but said that “four of the five major health plans experienced operating losses last year, making the need for adequate reserves all the more important.’’

 But the group’s respone to the state’s investigation is included in the report.  

 

Table 1. Amount of Statutory Surplus ($ millions)
Company 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
BCBS¹ 132 175 214 262 419 508 465 628 706 614
HMO Blue 230 266 312 354 468 583 764 840 881 707
BCBS & HMO Blue 362 441 526 616 888 1,091 1,229 1,468 1,586 1,321
Fallon 32 39 64 60 78 106 134 154 171 123
Harvard-Pilgrim 129 118 112 170 211 243 290 322 373 387
Health NE 3 6 8 10 12 17 25 31 36 38
Neighborhood 20 27 28 16 38 59 70 98 133 153
Tufts 68 106 158 189 293 337 404 481 547 436
UHNE 12 35 61 83 100 88 91 90 119 125
All Companies 627 772 957 1,144 1,618 1,941 2,244 2,643 2,967 2,583
¹BCBS is shown net of HMO Blue during the time they were reported together.

 

 

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