Pennsylvania insurance regulators have won a key court ruling that brings them one step closer to capping the amount of cash that the state's four Blue Cross and Blue Shield plans can sock away for a rainy day.
Commonwealth Court Judge Dan Pellegrini late last month lifted an injunction that had prevented the state's insurance department from publishing detailed information about the not-for-profit Blues plans' long-scrutinized cash surpluses, which stood at a combined $3.5 billion on Dec. 31, 2002. The injunction, granted in April, had stymied regulators' efforts to assign each Blues plan a maximum surplus level and to potentially force them to return any "excess" money to the community-a move the insurers have challenged as unlawful.
The department plans to post the information on its Web site by Aug. 9 and begin a 30-day public comment period in mid-August. The insurers will be allowed to submit revised filings excluding some proprietary data that the court determined could be withheld for competitive reasons. No date has been set for the final decisions.
"We are satisfied with the level of information that will be public," said department spokeswoman Roseanne Placey. "We always believed that the applications should be made available for public scrutiny and comment, so we fought for that to happen."
All four Blues plans said they intend to comply with the ruling. But at least one, Harrisburg-based Capital Blue Cross, has continued to challenge the process, arguing that the department is overstepping its bounds by trying to limit the company's surplus without authority from the state General Assembly.
In its filing to the department, the 900,000-member insurer said it held a surplus of $515.5 million as of Dec. 31, 2003. But it refused to restate the figure as a percentage of risk-based capital, or RBC-a formula that regulators have said they intend to use as a primary means of evaluating the Blues' surplus levels. Capital officials have maintained that the formula is not an appropriate way to determine if funds are excessive.
"(The company) continues to believe that RBC is potentially flawed on both legal and policy grounds," Capital President and Chief Executive Officer Anita Smith wrote in an e-mail to Modern Healthcare. "RBC is a static, one-time measure that does not take into account numerous forward-looking dynamics that are important to a fair and functional limit. The RBC levels contemplated by the department could produce an artificially low maximum surplus that could hurt providers, consumers and health insurance competition."
The action follows a three-year fracas in which providers and consumer groups have accused Capital, Independence Blue Cross, Highmark and Blue Cross of Northeastern Pennsylvania of stockpiling massive surpluses while premiums have continued to climb at double-digit rates and 1.4 million Pennsylvanians remain uninsured. The insurers contend that maintaining a substantial surplus is crucial to remaining competitive and ensuring that money will be available to pay claims in the event of a financial or healthcare crises.
In January, the department responded to critics by directing the insurers to submit detailed data about their surplus levels and the rationale for them, as well as a business plan for how any excess surplus would be used to temper premium increases or subsidize coverage for the uninsured (Jan. 26, p. 22).
But shortly after the filings were submitted in April, Capital and the Northeastern Pennsylvania Blues won a temporary injunction barring the data from being made public. They had each argued that some of the information involved "trade secrets" and would hurt them if competitors could access it.
In lifting the injunction, Pellegrini ruled that the companies must publicly disclose historical information about how they managed their surpluses in the past but are not obligated to reveal forward-looking information, such as how they plan to use their current surpluses.
Gerry Snyder, spokesman for the Northeastern Pennsylvania Blues, said the 600,000-member company was "satisfied" with the judge's ruling but has yet to decide what it will do if the department forces it to part with its surplus, which now stands at $404 million, or about 1,000% of RBC-well above the 350% to 650% range recommended by the department.
"This is just one step in an ongoing process," Snyder said, adding that the insurer plans to propose 800% of RBC as a suitable surplus ceiling. "Whether it would be appropriate to submit to a forced divestiture of funds is still under discussion."