Utah health insurers post healthy profits

The recession was short-lived for Utah’s health insurance companies.
Despite halting economic recovery, all but one of the state’s five largest insurers posted robust profits last year.
Some paid fewer medical claims than they expected due to cost-conscious patients delaying or forgoing medical care. Others captured new customers. All benefitted from a rebounding stock market and higher returns on investments.

Yet the companies — including the nonprofits SelectHealth and Regence BlueCross BlueShield, Utah’s two largest insurers — continue to hike premiums while sitting on large reserves.

They defend double-digit increases in rates that they charge as a means to prepare for the unknowns of federal health reform and the likelihood that people will spend more on health care when family finances stabilize.

“It’s important to have modest operating margins so that we can meet our obligation to pay claims and reinvest in the community to help our members,” said Mark Brown, a vice president and CFO of SelectHealth, the insurance arm of Intermountain Healthcare.

But industry watchdogs say insurers are socking away far more than regulations require, begging the question: when will consumers catch a break?

BlueCross BlueShield of Utah netted $16.2 million last year, a sharp reversal from 2009, when the company reported a $25 million loss.

And it built up reserves by 13 percent for a total of $244 million. That’s more than the company had socked away before the recession in 2006, and nearly eight times the amount required by the state Department of Insurance.

SelectHealth is resting on $279.7 million, seven times more than required, and posted a second year of profits.

“This is classic nonprofit behavior,” said Avram Goldstein, communications and research director the pro-reform group Health Care for America Now. “They’re hoarding cash at same time that they’re inflicting massive premium hikes on customers.”

Brown called SelectHealth’s reserve levels “safe and appropriate,” and said,” We have not made an effort to accumulate additional reserves.”

Jake Garn, chief examiner at the state insurance department, agrees: “By and large, health insurers don’t have excessive surpluses.”

He cautions against using reserve requirements as a gauge to determine whether nonprofits are feathering their nests, noting they are just a bare minimum meant to alert regulators to financial weaknesses that put policyholders at risk.

At a time when Americans are losing patience with soaring health care costs, it’s easy to blame insurers, said Garn. “But in Utah the profit percentage for health insurers is at about 1 percent. That’s lower than grocery stores, oil companies, pharmaceutical companies and hospitals.”

Utahns have long enjoyed some of the lowest insurance rates in the nation, but they’re rising with no relief in sight.

BY KIRSTEN STEWART
The Salt Lake Tribune
First published Jul 03 2011 11:08PM 
Updated Jul 7, 2011 08:28AM