Pat Kinnaird of Kenmore was furious when she got a letter saying her longtime health insurer, Regence Blue Shield, decided not to offer coverage in King County next year, citing uncertainty in the market.
At the same time Regence is abandoning customers in Washington’s market for individual insurance, it is seeking rate increases in the state averaging 30 percent next year.
And the company is sitting on a $1.1 billion surplus.
“I think that’s abominable,” said Kinnaird, 73. “I don’t see how they can go before our insurance commissioner year after year and ask for raises in rates when they’re sitting on that cash.” (Though eligible for Medicare, Kinnaird buys her own insurance because others are more deserving, she said, of the government-insurance program for the elderly.)
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Regence is not alone, according to filings with the state Office of the Insurance Commissioner. Premera Blue Cross has proposed 28-percent increases, on average, and reported a surplus of $1.5 billion at the end of 2016. Kaiser Permanente is asking for rate increases averaging 13 percent and had a $917 million surplus.
Insurers say they need deep reserves in the event of unforeseen disaster.
All of which revives the question: Shouldn’t those reserves be used to reduce rate hikes?
That was the stance of Insurance Commissioner Mike Kreidler, who wanted a change in state law in 2012 allowing him to consider surpluses in annual rate reviews. But Kreidler was rebuffed by lawmakers who were sold on the insurers’ argument that they needed those cushions against market uncertainty, particularly with the implementation of the Affordable Care Act (ACA).
Kreidler, who said “I’m not giving up”on the 2012 quest, is now more sympathetic to insurers.
“Few insurance markets can go south quicker than health insurance, so the commissioner is tempering his views on the use of surpluses in light of the instability originating from the White House and Republicans in Congress,” said Steve Valandra, a spokesman for Kreidler.
Republicans are trying to sabotage the ACA, Valandra said in an email. They won’t enforce the ACA’s individual mandate, which expands the risk pool by requiring all Americans to have health insurance. And they won’t commit to the cost-sharing subsidies that help lower premiums, he said.
But insurers have argued that they needed robust reserves over the seven years since the ACA was signed into law to deal with its uncertainties, said Patrick Connor, state director of the National Federation of Independent Business. Consumers and small-business owners face uncertainty, too, Connor said, about costs and access to coverage.
What seems to have changed most in Kreidler’s position, Connor said, is which party is pushing health-care reform. Billion-dollar surpluses in 2012 were excessive when Kreidler, a Democrat, supported ACA reforms, Connor said.
“Now that he opposes current federal health-care reform legislation, the carriers’ uncertainty is suddenly warranted, as are even larger surpluses,” Connor said.
Kreidler shares concerns about rising deductibles and out-of-pocket costs, Valandra said. But he believes those should be addressed through bipartisan changes to the ACA.
“Instead, we see nothing but attempts to gut the law now,” he said.
Senate Republican leaders unveiled a 172-page proposal they plan to put to a vote, with possible amendments, in the coming week. The GOP plan would keep a pair of ACA taxes on high-income people and provide about $70 billion to help reduce consumer costs. It would eliminate two planks of the ACA — the individual mandate and cost-sharing subsidies — vital to insurers.
A “leaky bucket”?
Premera, Regence and Kaiser all say their surpluses are prudent.
Premera’s financial reserve functions as a safety net for its 2 million customers, said spokeswoman Melanie Coon in an email. The reserve assures that Premera can pay customers’ claims in the event of a financial-market collapse or dramatic change in expenses, she said.
Premera’s surplus is larger than that of competitors because it has more customers, she said. Using those funds to provide short-term rate relief doesn’t address the larger issue of steadily rising costs of medical care that drive higher rates.
“It would be like pouring water you’re saving in case of a drought into a leaky bucket. Eventually, you run out of water,” she said.
In its letter to customers, Regence said the individual market continues to be unsettled nationally — and Washington, where 300,000 customers buy insurance on the individual market, is no exception.
A Regence spokeswoman echoed Premera’s points.
“Our reserves are currently equal to about $2,900 per member. This is far short of what is needed in an emergency situation,” Jennifer Morgan said in an email, “especially during times of market volatility and rising medical costs.”
Similar arguments were made by a Kaiser Permanente spokesman.
“Our accountability is to our members to steward a strong financial position today and into the future,” Jackson Holtz said.
Open enrollment in fall
Kreidler’s staff will review the filings in coming months to make sure the increases are warranted.
Once that review is done, the state will certify plans for sale in Washington Healthplanfinder on Sept. 14. Open enrollment for the 2018 individual market starts Nov. 1.
Complicating the picture is a new report by the nonprofit Kaiser Family Foundation, which is not associated with Kaiser Permanente.
On one hand, the report says, the national insurance market improved last year, and first-quarter 2017 data offer more evidence the individual market “has been stabilizing and insurers are regaining profitability.”
“Insurer financial results show no sign of a market collapse,” the report said, contrary to what President Donald Trump has contended. “Some insurers have exited the market in recent years, but others have been successful and expanded their footprints as would be expected in a competitive marketplace.”
At the same time, the Kaiser Family Foundation agrees with Kreidler that “policy uncertainty has the potential to destabilize the individual market generally.” Mixed signals from the Trump administration and Congress on continuing cost-sharing subsidies and enforcing the individual mandate “have led some insurers to leave the market or request larger premium increases than they would otherwise.”
Valandra, Kreidler’s spokesman, said the report “confirms that if we worked to strengthen the Affordable Care Act and took a long-term approach to health care reform, the market would stabilize and the country would benefit.”