Even though Excellus has nearly twice as much in reserves than the state requires, the health insurer does not want to use any of that money to offset rate increases, according to documents the company has submitted to the state justifying its request to increase rates by as much as 20 percent next year on some health plans.
Instead, it wants members to contribute even more to that fund.
Under its proposal, Excellus would take anywhere from $5.52 to $11.95 a month from some members’ premium payments and add that money to its reserves. Customers in one plan, the company's direct pay HMO, would pay nothing into the
reserve fund because Excellus is seeing a rate decrease for that product.
“These reserves are the ‘insurance’ that assures payment even when costs run higher than anticipated, or emergencies or disasters occur, and should not be used as an alternative fund to temporarily reduce rate adjustments,” Excellus says in documents filed with the state Department of Financial Services.
Excellus is seeking permission from state regulators to increase rates on some of its community-rated products Jan. 1. Community-rated plans for individuals and groups are policies that charge the same amount regardless of age, sex, health status or occupation. The proposed rate changes will affect about 90,000 of the company’s 700,000 members in Central New York. The increases do not apply to experience-rated large groups or self-insured plans.
The documents related to health insurers’ rate hike requests used to be secret. But late last year the state ordered insurers to make them public so customers can review them and submit comments to regulators who decide whether to grant the increases, reduce or reject them.
Excellus has come under criticism for amassing a big reserve fund while consumers struggle to afford health insurance.
“It’s a disservice to consumers that they’re (Excellus) not using their reserves to defray some of the proposed rate increase,” said Elisabeth R. Benjamin, a lawyer and co-founder of Health Care for All New York, a statewide coalition of more than 130 nonprofit groups pushing for more affordable health insurance options for state residents. “We would submit the state should not permit the rate increase to further allow this carrier to stockpile its reserves.”
Consumers Union, publisher of Consumer Reports, issued a report in 2010 that said Excellus and other BlueCross BlueShield plans across the country were salting away more money than necessary in their reserve funds. At that point, Excellus had $965.1 million in reserves.
Since then its reserve fund has grown by more than 30 percent.
Money in the fund comes from the company’s surplus or profits.
A portion of every rate increase by insurers is usually earmarked as a contribution to reserves, said Laurie Sobel, a senior attorney with Consumers Union. That’s why regulators reviewing a rate increase request need to look at an insurer’s reserve levels, she said. If those levels are excessive, regulators can protect consumers from unnecessary rate increases by disallowing additional contributions to reserves, she said.
The minimum amount of reserves Excellus must have to meet state requirements is $703 million.
That amount would not give Excellus, which has nearly 2 million members, a sufficient cushion, said Elizabeth Martin, a company spokeswoman.
“That’s like saying to someone that they should strive to have a minimum amount in their savings account, but that might not be enough if suddenly they need to cover large unforeseen expenses,” Martin said.
Excellus has about $792 in reserves per member, enough to cover claims for about three months, she said. The average amount of reserves per member held by other upstate nonprofit insurers is $1,179, she said.
Excellus last dipped into its reserves in 2008. It used $244 million from the fund to offset higher than expected medical expenses, declining enrollment and investment losses. If the fund had been at the minimum level the company would have had to impose steep rate increases in 2009, Martin said.
Excellus made a profit of $223 million in 2011 on revenue of $5.7 billion. The 2011 profit was about five times bigger than the $44.5 million profit it made in 2010. It also tripled the pay last year of its top executive to $5.2 million.
In its pending rate filing, Excellus says its proposed increases are designed to allow the company “ ... to achieve a modest operating margin.”
Excellus says it is “... sensitive to the fact that individuals and small businesses struggle to afford higher premiums.” But it warns that failure by regulators to approve the rate hike request would lead to the need for even greater increases in the future.
Excellus says the escalating cost of health care services, equipment and products continues to be the primary reason for rate increases.
In its filing, Excellus says rate increases are being driven by a combination of higher costs and greater use of medical services and equipment by consumers.
Health insurers come up with spending forecasts by multiplying the anticipated increase in cost of a medical service by the rate of consumption or use of the service or product. This is known as the “medical trend,” a measure of medical inflation.
Excellus is forecasting spending next year will increase 9.6 percent to 12.7 percent for hospital outpatient services, 7.8 percent to 8.7 percent for hospital inpatient services, 3.1 percent to 7.1 percent for professional services such as doctor office visits, and 5.7 percent to 7.9 percent for drugs.
The public has until Aug. 11 to submit comments to the state about the proposed rate changes.
Comments can be submitted online, by email to PremiumRateIncreases@dfs.ny.gov or by mail to: Charles Lovejoy, Health Bureau, New York State Department of Financial Services, 25 Beaver St., New York, NY 10004.
Proposed rate increases
Here are the rate increases proposed by Excellus BlueCross/Blue Shield:
High-deductible health plans, Preferred Provider Organization: Up to 19.9 percent
Direct pay indemnity plans purchased by individuals: Up 12.3 percent
Direct pay Health Maintenance Organization and Point of Service: Decrease 3.4 percent.
ValuMed Plus, a policy for individuals on limited incomes: Up 14.1 percent
Healthy New York, another plan for individuals with limited income: Up 3.6 percent.
Medicare Supplemental plans: Down 0.5 percent.
Source: Excellus
Instead, it wants members to contribute even more to that fund.
Under its proposal, Excellus would take anywhere from $5.52 to $11.95 a month from some members’ premium payments and add that money to its reserves. Customers in one plan, the company's direct pay HMO, would pay nothing into the
reserve fund because Excellus is seeing a rate decrease for that product.
“These reserves are the ‘insurance’ that assures payment even when costs run higher than anticipated, or emergencies or disasters occur, and should not be used as an alternative fund to temporarily reduce rate adjustments,” Excellus says in documents filed with the state Department of Financial Services.
Excellus is seeking permission from state regulators to increase rates on some of its community-rated products Jan. 1. Community-rated plans for individuals and groups are policies that charge the same amount regardless of age, sex, health status or occupation. The proposed rate changes will affect about 90,000 of the company’s 700,000 members in Central New York. The increases do not apply to experience-rated large groups or self-insured plans.
The documents related to health insurers’ rate hike requests used to be secret. But late last year the state ordered insurers to make them public so customers can review them and submit comments to regulators who decide whether to grant the increases, reduce or reject them.
Excellus has come under criticism for amassing a big reserve fund while consumers struggle to afford health insurance.
“It’s a disservice to consumers that they’re (Excellus) not using their reserves to defray some of the proposed rate increase,” said Elisabeth R. Benjamin, a lawyer and co-founder of Health Care for All New York, a statewide coalition of more than 130 nonprofit groups pushing for more affordable health insurance options for state residents. “We would submit the state should not permit the rate increase to further allow this carrier to stockpile its reserves.”
Consumers Union, publisher of Consumer Reports, issued a report in 2010 that said Excellus and other BlueCross BlueShield plans across the country were salting away more money than necessary in their reserve funds. At that point, Excellus had $965.1 million in reserves.
Since then its reserve fund has grown by more than 30 percent.
Money in the fund comes from the company’s surplus or profits.
A portion of every rate increase by insurers is usually earmarked as a contribution to reserves, said Laurie Sobel, a senior attorney with Consumers Union. That’s why regulators reviewing a rate increase request need to look at an insurer’s reserve levels, she said. If those levels are excessive, regulators can protect consumers from unnecessary rate increases by disallowing additional contributions to reserves, she said.
The minimum amount of reserves Excellus must have to meet state requirements is $703 million.
That amount would not give Excellus, which has nearly 2 million members, a sufficient cushion, said Elizabeth Martin, a company spokeswoman.
“That’s like saying to someone that they should strive to have a minimum amount in their savings account, but that might not be enough if suddenly they need to cover large unforeseen expenses,” Martin said.
Excellus has about $792 in reserves per member, enough to cover claims for about three months, she said. The average amount of reserves per member held by other upstate nonprofit insurers is $1,179, she said.
Excellus last dipped into its reserves in 2008. It used $244 million from the fund to offset higher than expected medical expenses, declining enrollment and investment losses. If the fund had been at the minimum level the company would have had to impose steep rate increases in 2009, Martin said.
Excellus made a profit of $223 million in 2011 on revenue of $5.7 billion. The 2011 profit was about five times bigger than the $44.5 million profit it made in 2010. It also tripled the pay last year of its top executive to $5.2 million.
In its pending rate filing, Excellus says its proposed increases are designed to allow the company “ ... to achieve a modest operating margin.”
Excellus says it is “... sensitive to the fact that individuals and small businesses struggle to afford higher premiums.” But it warns that failure by regulators to approve the rate hike request would lead to the need for even greater increases in the future.
Excellus says the escalating cost of health care services, equipment and products continues to be the primary reason for rate increases.
In its filing, Excellus says rate increases are being driven by a combination of higher costs and greater use of medical services and equipment by consumers.
Health insurers come up with spending forecasts by multiplying the anticipated increase in cost of a medical service by the rate of consumption or use of the service or product. This is known as the “medical trend,” a measure of medical inflation.
Excellus is forecasting spending next year will increase 9.6 percent to 12.7 percent for hospital outpatient services, 7.8 percent to 8.7 percent for hospital inpatient services, 3.1 percent to 7.1 percent for professional services such as doctor office visits, and 5.7 percent to 7.9 percent for drugs.
The public has until Aug. 11 to submit comments to the state about the proposed rate changes.
Comments can be submitted online, by email to PremiumRateIncreases@dfs.ny.gov or by mail to: Charles Lovejoy, Health Bureau, New York State Department of Financial Services, 25 Beaver St., New York, NY 10004.
Proposed rate increases
Here are the rate increases proposed by Excellus BlueCross/Blue Shield:
High-deductible health plans, Preferred Provider Organization: Up to 19.9 percent
Direct pay indemnity plans purchased by individuals: Up 12.3 percent
Direct pay Health Maintenance Organization and Point of Service: Decrease 3.4 percent.
ValuMed Plus, a policy for individuals on limited incomes: Up 14.1 percent
Healthy New York, another plan for individuals with limited income: Up 3.6 percent.
Medicare Supplemental plans: Down 0.5 percent.
Source: Excellus
Vidya Sri
"To date, over 5,000
communities from eight countries have joined in abandoning both Female Genital
Cutting (FGC) and child/forced marriage." 
Cristina is the S. J. P. Harvie Professor of Social Thought
and Comparative Ethics, Professor of Philosophy and Director of the Philosophy,
Politics & Economics program at the University of Pennsylvania. She is a
leader in the fields of rational choice and social norms. She has published six
books and hundreds of articles. 
