Blue Cross and Blue Shield of Alabama has compiled a surplus approaching $1 billion and has another $1.8 billion of cash, stocks and bonds, figures that have attracted the criticism of those who say that is too much for a health-benefit plan with a market share of 90 percent.
The Birmingham-based medical-benefit company had total assets of $2.4 billion at the end of 2011, according to records furnished by the Alabama Department of Insurance. More than half of the assets consisted of the $1.8 billion of cash or instruments easily converted to cash such as stocks and bonds, according to the company’s balance sheet supplied by the Insurance Department. Blue Cross of Alabama also had net income of $257 million in 2011, the records show, a 58 percent gain from 2010. Revenue last year was $4.1 billion.
The company’s revenues and profits have also allowed it to amass a surplus — a cash war-chest the insurance industry call “unassigned funds” — of $991 million. Blue Cross says its financial reserves are appropriate and in line with industry standards.
Alabama had the least competitive market for medical care coverage last year, according to the American Medical Association, with Blue Cross having commanded a market share of 90 percent. The company’s plans cover about 2 million Alabamians — more than half the state’s population. Most are covered by employer-paid workplace plans, the rates of which have risen an average of 6.2 percent in the past five years for employer-sponsored plans of fewer than 50 workers.
Now, the company’s prosperity and marketplace muscle is attracting renewed resistance. Blue Cross — a company which describes itself as “private and non-investor owned” — has been sued seven times so far this year on anti-trust grounds in U.S. District Court in Birmingham. The claims are the company conspires with others to avoid competition. They are the first such suits since 2000, according to court records.
“If there were true competition, they would not be able to compile such largesse, such enormous reserves,” said Birmingham lawyer Joe Whatley, whose Whatley Kallas Litigation and Healthcare Group sued Blue Cross on anti-trust grounds last month on behalf of a retired Alabama chiropractor. “In Alabama there is no regulation of Blue Cross rates and no meaningful competition. It is a clear monopoly.”
Blue Cross Alabama says its financial power is insurance against an avalanche of claims, savings that will allow it to pay its obligations regardless of short-term conditions. The company, which employs 3,000 people in the metro area, also said the 2010 U.S. Department of Health and Human Services survey found Blue Cross of Alabama offered the second-most affordable employer-sponsored family health plans in the country.
“Blue Cross maintains an appropriate level of reserves to protect our customers,” said spokeswoman Koko Mackin. “We are committed to our mission of providing employers, families, and individuals access to quality, affordable health care.”
Mackin declined to comment on pending litigation. She also said the company’s reserves represent 3.3 months of claims incurred by Blue Cross, and average $600 per insured member. That, Mackin said, is the average cost of an emergency room visit.
The lawsuits filed this year all state similar claims, saying Blue Cross and about three dozen similar plans in other states allied under the national Blue Cross umbrella have conspired to not compete with each other, divvying up territories to avoid competing for customers. That, one of the suits says, has allowed the plans to engage in predatory pricing and amass enormous assets in the process.
The most recent suit, filed by the retired Alabama chiropractor last month, says the prospect of losing out on reimbursement by market dominators such as Blue Cross of Alabama means doctors and hospitals are forced to accept lower payments for their services than if more robust competition prevailed. The July 2012 suit cites the financial might of Blue Cross of Alabama as suggestive of improper market dominance.
“This has further allowed BCBS defendants to collect supra-competitive profits, higher than they would have experienced had there been unimpeded competition in the states in question,” says the suit filed last month by former chiropractor Jerry Conway. “Indicia of supra-competitive profits include high medical loss ratios, high underwriting margins, and surpluses well above statutory requirements.”
via Blue Cross Blue Shields $2.8 billion in assets draws criticism | al.com.