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December 22, 2015

Nonprofit Insurer Raises Rates Despite $9.9 Billion Surplus

The Houston Chronicle reports on the finances of Health Care Service Corp., the nation's largest customer-owned insurer, which is seeking to raise premiums and eliminate some coverage plans while maintaining a $9.9 billion reserve fund. The Chicago-based nonprofit, known as HCSC, is the parent of Blue Cross and Blue Shield of Texas, which has been granted approval to raise rates by 20 percent and drop preferred-provider-organization plans next month.

HCSC boosted revenue by 22 percent to $27.7 billion in 2014 and gave its CEO a $10 million bonus, the Chronicle writes, citing financial statements and other documents. The company maintained that it operates on "thin margins," with a net loss of $282 million last year, and will not dip into its reserve fund to keep a lid on rates or preserve loss-making coverage plans.

"Our reserves serve a different purpose and that is to remain in place to protect our nearly 15 million HCSC members and ensure anticipated and unanticipated claims by our members," said Carl McDonald, a company senior vice president. John Rowe, a Columbia University health-policy professor and the former CEO of Aetna, said maintaining a nearly $10 billion rainy-day fund is "unusually aggressive for a nonprofit."