Blue Cross $991M surplus draws criticism, fear of monopoly


Blue Cross Blue Shield of Alabama is coming under fire for amassing a surplus of nearly $1 billion when it already controls 90 percent of the state's insurance market.

The Birmingham-based insurer stockpiled $2.4 billion in total assets and $257 million in net income at the end of 2011, allowing Blue Cross to accumulate a total surplus of $991 million, reported The Birmingham News.

But Blue Cross defended its surpluses, claiming they're appropriate and in line with industry standards. "Blue Cross maintains an appropriate level of reserves to protect our customers," spokeswoman Koko Mackin told the Birmingham News. She added that the additional money accounts for just 3.3 months of claims and average $600 per insured member.

And because Blue Cross can't receive money from the state's emergency reserve pool for struggling insurers, it must establish a financial cushion for itself. "The Alabama insurance guaranty funds do not cover Blue Cross and Blue Shield of Alabama," Mackin said. "Blue Cross' financial reserves, therefore, are the company's only source of funds to ensure that our members' current and future claims are honored."

Meanwhile, Blue Cross is facing seven lawsuits filed this year, all claiming that it conspires with other Blues plans to prevent competition. The most recent lawsuit claims the company is driving up insurance costs and reducing provider payments, FierceHealthPayer previously reported.

Alabama's health insurance market is the least competitive region in the country, with Blue Cross commanding 90 percent. "If there were true competition, they would not be able to compile such largesse, such enormous reserves," said Joe Whatley, whose law firm Whatley Kallas Litigation & Healthcare Group filed the latest in the string of lawsuits. "In Alabama, there is no regulation of Blue Cross rates and no meaningful competition. It is a clear monopoly."

To learn more:
- read the Birmingham News article

Related Articles:
Blues plans allegedly conspire to avoid competition
Health savings account enrollment jumps 26% in large group plans
Report: Scarce competition among insurers
HHS takes over rate reviews in 10 states