Fw: [nbofe] PA- Health insurers sued over surplus Class action suit

[Guest guest]

PA- Health insurers sued over surplus Class action suit

>

>

>

>Health insurers sued over surplus Class action suit says nonprofits

hoarding

>money

>

>Saturday, June 30, 2001

>

>By Pamela Gaynor, Post-Gazette Staff Writer

>

>Several individuals and small employers have sued Highmark Inc., the

state's

>largest health insurer, and Capital Blue Cross, which serves Central

>Pennsylvania, claiming they have violated their nonprofit status by

hoarding

>money.

>

>The suit filed against Highmark charges that it has acted as a nonprofit

" in

>name only " while amassing " a war chest of surplus [funds] " in excess of $2

>billion and " far in excess of the amounts necessary to secure and insure

>[its] financial solvency. "

>

>Neither insurer had seen the class-action suits filed yesterday, but

>Early, a spokeswoman for Highmark, said the state Insurance Department

>monitors Highmark's reserves to determine whether they are excessive.

>

>A spokeswoman for Capital Blue declined comment.

>

>State Insurance Department Press Secretary nne Placey said there are

>state minimum requirements that dictate the amount an insurer must set

aside

>to guarantee solvency. She didn't know, however, if there is a maximum,

>beyond which a surplus is deemed excessive.

>

>The suit, filed in York County Court of Common Pleas, said Highmark's

>financial reserves have swelled not only in size, but also as a percentage

>of claims and expenses.

>

>In 1996, Highmark's surplus funds amounted to $1.48 billion, or 26.7

percent

>of claims and expenses that year, the suit said.

>

>By last year, the surplus had climbed to $2.03 billion, or 34.7 percent of

>claims and expenses incurred in 2000.

>

>Because the insurer's 1996 annual financial filing with the state

> " represented and maintained that an amount of surplus equal to

approximately

>26.7 percent ... was more than adequate for the financial operations and

>solvency of the company, " the latest reported amount of 34.7 percent means

>Highmark's reserves are at least $463 million greater than they need to be,

>the suit said.

>

>The suit also claims that Highmark's merger and acquisitions strategy, its

>investments in businesses that operate outside the state, including

>for-profit ventures, are not consistent with its status as a nonprofit

>corporation.

>

>The plaintiffs, all chiropractors, chiropractic clinics or their employees,

>were named as Lawrence S. Herman of Frederick, Md.; Nachas Inc., of

>Waynesboro, lin County; Chiropractic Center, of York; and

> , of York.

>

>Asked why the suit was being filed now and whether it was prompted by their

>role as health-care providers under Highmark's insurance plans, attorney

> M. Laigaie said the parties had considered suing for some time,

>feeling " they were being triangulated. " They've been seeing reduced fees as

>providers, higher premiums as employers and lower benefits as health-plan

>subscribers.

>

>The plaintiffs are covered under insurance plans operated jointly by

Capital

>Blue and Highmark.

>

>The timing of the suit was triggered in part by Highmark's decision to go

>into competition with Capital Blue after the two failed to reach a merger

>agreement, said another plaintiff attorney, Gregg Mackuse.

>

>Using their resources to start competing ventures is not consistent with

the

>statutory mission of nonprofits, he said.

>

>Mackuse and Laigaie also noted that Highmark has raised the possibility of

>converting to a for-profit status.

>

>Highmark's spokeswoman said the insurer has no active plans to convert or

>mount a public stock offering.

>

>But she said the possibility is something the insurer has to " keep on the

>shelf " should it be necessary to gain access to additional capital.

>

>

>

>

>Cheers,

>Dan Bowerman DC FACO

>512 S 4th St

>Phila PA 19147-1507

>215 923 5577

>

>Support me on the VACCINE RIDE! rider 20844 Check out

>http://www.vaccineride.org/alaska/

>Pledge your tax deductible contribution Here!

>http://reduce.to/DanBowerman/

>-or- send me a check to Alaska AIDS Vaccine Ride, with rider 20844 in the

>memo

>

>

>

>

>

>