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Colorado News Stories about Kaiser Permanente
Plans have built up enormous cash surpluses from higher premiums in ecent years, prompting calls from consumer groups that it is time for the health giants to offer rebates or spend the money on their communities.
Both nonprofits hold hundreds of millions of dollars in reserve, now amassed to six or even eight times the cushions required by state regulators to avoid remedial action. The state required Kaiser to spend some of its surplus in 2008 to benefit consumers, but Kaiser's surplus is now nearly three times what it was when that agreement was made.
Kaiser ended 2010 with $666 million in its "risk-based capital" account, effectively a savings bank for unforeseendisasters or major initiatives. That is 1,287 percent of the minimum surplus required to keep Colorado regulators from assuming full control of a health plan. The dollar amounts of minimum surplus requirements vary by insurer depending on the number of people it serves, its investments and other risk factors.
Rocky Mountain HMO, based in Grand Junction, reported $110 million, which is 1,743 percent of the minimum surplus. Rocky Mountain's smaller indemnity insurance plan reported a surplus of 187 percent, slightly below a 200 percent threshold where the state asks for some remedial action. The HMO plan will probably transfer some of its excess capital to the indemnity plan to restore its cushion, state officials said.
The excess is "an enormous amount of money," said Dede de Percin, executive director of the Colorado Consumer Health Initiative, which represents 200 groups and hundreds of thousands of members. Nonprofits enjoy tax exemptions that help them accumulate surpluses at a time when public budgets are strapped for cash, she said.
How much is too much?
All states have minimums for insurer surpluses, and a few have set maximums as well. Michigan capped surpluses for its major Blue Cross plan at 1,000 percent, while Pennsylvania said its largest plans needed no more than 750 percent of capital reserves.
Kaiser and Rocky Mountain Health Plans say they are already spending tens of millions of dollars a year to benefit consumers. They also say major building projects and the higher costs of health reform require greater surpluses.
The huge cash reserves accrued during a time when consumer groups and government watchdogs have decried steep annual increases in health-insurance premiums by both nonprofit and for-profit companies.
"We should be really clear about their obligations back to us in exchange for granting that status," de Percin said. The surplus could be spent on consumers in the form of lower insurance premiums or hiring providers for underserved rural areas and Medicaid clients, she said.
"An excessive and continually growing surplus is a good indicator that insurance rates should actually be decreased," said state Sen. Morgan Carroll, D-Aurora, who sponsored a 2008 bill directing insurance regulators to consider everything from executive pay to surplus levels when approving annual premium requests.
Officials in Pennsylvania, Maryland, Rhode Island and the District of Columbia have rejected rate increases or called for community spending when their nonprofit insurers amassed excessive surpluses. Colorado's Division of Insurance in 2008 reached a $155 million agreement with Kaiser to give clients premium credits and spend money building clinics in underserved parts of the state, including Pueblo.
Interim Colorado Insurance Commissioner John Postolowski said the state is keeping a sharp eye on the surpluses held by Kaiser and Rocky Mountain Health Plans, and Kaiser was notified in November about the high reserves.
Postolowski said the division decided to delay any further talks until final 2010 balance sheets — due this month — are filed.
"It is an ongoing issue, how much is too much. It is a national issue," Postolowski said. "We do monitor that, and we will call them in if necessary."
The two Colorado nonprofits acknowledge their high reserves but argue the accounts are prudent in a rapidly changing health care environment.
Colorado's for-profit health insurers also are doing well, and the state is required to take their profits into account when approving rate increases. UnitedHealthcare reported a capital reserve of 413 percent at the end of 2009, Anthem had 449 percent of the minimum, and HMO Colorado had 578 percent. Health Care for America Now, a pro-reform group in Washington, said the five biggest commercial insurers saw profits climb 17 percent in 2010 to $11.7 billion.
Kaiser Permanente regional president Donna Lynne said her nonprofit has unique challenges because it employs doctors and owns clinics directly and is in the midst of a major bricks-and-mortar building campaign.
Kaiser's surplus levels jumped after the 2008 deal with Colorado regulators because part of the agreement required the insurer to bring back reserve money it had parked with its parent company in California.
Kaiser is spending $200 million to build a large office building and clinic in Lone Tree, serving the south metro area, among other projects, Lynne said. Kaiser is by far the largest private health insurer in Colorado, with more than 500,000 members and more than 22 percent of the market, according to state figures.
Colorado officials confirmed another Kaiser argument, that it provided $91.5 million in community benefits in 2010, through wellness programs, forgiven co-pays for needy clients and other charity efforts.
"We're not paying money to shareholders. The money we have is either going directly into patient care or into the community," Lynne said. She noted that in the same state report showing high capital reserves, Kaiser was also shown to have among the lowest ratio of administration expenses to actual health care provided.
Rocky Mountain Health Plans president Steve ErkenBrack said the HMO's large surplus is in part a contingency for the upheaval coming in national and state health care reform.
The health plan, which already serves some Medicaid patients, will see many more as a result of state and federal expansion of Medicaid eligibility. Since most health plans lose money on Medicaid patients, a deep surplus is needed, ErkenBrack said.
The Western Slope-based plan administers health care to 170,000 people across the state, through the HMO and other subsidiaries.
The savings account also allows Rocky Mountain to launch community programs such as its tobacco-free effort aimed at mothers with young children, he said. Rocky Mountain spent $1.9 million on "community benefit" programs from 2008 to 2010.
"We are the only entity out there that serves all these lines of business," ErkenBrack said, including employers, Medicaid and Medicare patients and other potentially expensive categories of insurance.
"The surplus got built to be prepared for these future charges," he said.
Reserves vs. mission
ErkenBrack also said the recession had an unexpected impact on the surplus that has yet to play out. Use of health care services by Rocky Mountain members declined during the recession, because people worried about their jobs and income tend to put off services that might require a co-pay or a deductible. But those needs don't disappear, ErkenBrack said; they only get delayed — so Rocky Mountain planners expect patient visits and costs will grow again, requiring money from the surplus.
Nonprofits also argue that they don't have the same access to expansion or emergency money that a for-profit insurer does. For-profit companies can sell stock on Wall Street or borrow more easily from commercial sources.
Consumer advocates say that large insurers with huge cash flows from premiums, even nonprofits, can find loans when they need them. Regulators, they argue, need to think about the nonprofit's mission.
"Let's put some transparency on that," said Sondra Roberto, a staff attorney with Consumers Union, the publisher of Consumer Reports and co-author of a 2010 study on nonprofits' holding on to excessive cash. "Meeting the needs of your community should be foremost. We're saying let's balance that pot of money against the needs of the community and make sure we're not overdoing it."
Former Division of Insurance director Marcy Morrison, who helped negotiate the 2008 agreement with Kaiser, said consumers deserve to know as much as possible about the nonprofits and to be assured regulators are watching.
"Some of the nonprofits are growing, more than substantially," she said. "We need to know what these nonprofits are doing; I really feel strongly about that."
Michael Booth: 303-954-1686 or firstname.lastname@example.org
Read more: Insurers' enormous cash surpluses prompt calls for rebates or community spending - The Denver Post http://www.denverpost.com/search/ci_17603819#ixzz1GgNWBlOs