Three big insurers, three big profits

The Seattle Times
November 13, 2005

The three big health insurers in Washington — Premera, Regence and Group Health — have been quietly piling up more money than they need.

The state may have to re-regulate the market for individual and family health insurance unless there is more-aggressive competition.

This is a change since the late 1990s, when the three insurance carriers shut down the individual market after losing millions. Regulation was too heavy-handed, they said; and after a year of offering no insurance for sale, they cut a deal with Gov. Gary Locke. They would open the market if the insurance commissioner's authority over their rates was replaced by a simple price-cap formula. As long as the carriers paid out at least 72 cents in benefits from each dollar, they could charge what they liked. That reopened the market. It is still open, and there are plans to choose from. (Compare them at

But according to that California Internet company, Seattle is one of the more-expensive cities in America for health coverage. A typical policy for a family of four, with $2,000 deductible and 20-percent coinsurance, is $190 a month in San Francisco — and $410 in Seattle.

Why? Bob Fahlman, the company's chief operating officer, listed three reasons: Washington has more coverage mandated by law; its doctors and hospitals charge more; and, "You have limited competition."

The insurance companies that fled Washington during the 1990s have not returned. Our market is relatively small. The political risk may appear high. Besides, Group Health has its own doctors, and Premera and Regence have set up networks of doctors. That raises the bar for new players.

All three players are not-for-profit. Their money belongs, in theory, to their customers. Yet, from 2000 to 2004, capital and surplus at Premera and its subsidiary, Lifeline, increased from $271 million to $446 million; at Regence and Regence Care, from $389 million to $642 million; and at Group Health, from $152 million to $371 million.

We asked Weiss Ratings, Inc., which rates companies for financial safety, whether the companies are piling up too much. "Our perspective is, the more the better," Vice President Melissa Gannon told us. "But they do have above and beyond what they need." She said Premera has 2.5 times the amount of capital it needs to be financially sound, Group Health 3.3 times and Regence 4.1 times.

We asked Insurance Commissioner Mike Kreidler whether the state has any standard for too much retained profit. It doesn't. Like Weiss', the state's standard has been the more, the better. Kreidler has, however, set a public hearing Dec. 8. The subject: "Excess surplus."

The companies appear to have a choice between more regulation or more competition. If we were them, we would prefer the second.

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