N.D. Poolman Says Blues Have Enough Reserves for Premium Break

Blue Cross Blue Shield of North Dakota, the state’s largest insurer, has more than $222 million in reserves, enough to offer its members a break, North Dakota Insurance Commissioner Jim Poolman says.

The Blues’ reserves are enough to cover more than four months of claims, Poolman said. He suggests the company consider a one-month premium holiday.

Blue Cross Blue Shield is considering the possibility of a premium holiday, but no decision has been made, said Larry Gauper, a Blues spokesman.

Blue Cross Blue Shield is a not-for-profit, mutual insurance company, which means it is owned by its members.

“Those gains are being made at the expense of the North Dakota consumer,” Poolman said.

He estimates a one-month premium holiday would return about $30 million to North Dakota consumers. Gauper said it would benefit about 170,000 members. Self-funded groups, the state employee group and Medicare policy holders would be exempt.

The company is in a good reserve position, but planning for spikes in health care costs is difficult, Gauper said.

The Blues seek to keep enough reserves to cover between two months and four months of claims, Gauper said.

State law requires a minimum level of reserves but does not cap them. Blue Cross Blue Shield has more than three times the minimum level needed, Poolman said.

Since 2000, Blue Cross Blue Shield has posted underwriting gains, which are premium payments minus claims and operating costs. Last year the company added more than $30 million to its reserves.

“Those reserves are our financial strength to cover unknown future costs,” said Janine Weideman, vice president of the Blues’ actuary and membership department.

A healthy reserve allows the company to keep rate increases stable instead of issuing big premium bumps to cover unexpected costs, she said.

Poolman said he has approved lower increases than the Blues requested in recent years.

This year, Poolman approved a 2.9 percent average increase for the company’s bank depositor group, which represents individual premiums, after the company requested a 4.2 percent increase, according to his office. Requests for large group rates in 2007 will be filed in September.

“It’s my job, as the commissioner, to make sure a not-for-profit company isn’t holding too much of their (policyholders’) money,” Poolman said. “It’s time to take corrective action.”

Blue Cross Blue Shield offered a one-month holiday premium in 1994, Weideman said. Some employers struggled with paperwork involved in payroll deductions and tax implications as a result.

Two years later, Weideman said, the company experienced four consecutive years of underwriting losses. The Blues followed those with its highest rate increases in the past decade to compensate.

“It’s difficult to explain to people why you’d give them a refund and then turn around and have to increase rates,” Weideman said. “It’s always a moving target.”