Health insurers: Highmark + Capital Blue Cross sued over surplus

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Specializes in Vents, Telemetry, Home Care, Home infusion.

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 Karen 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 Rosanne 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, Franklin County; Mitchell Chiropractic Center, of York; and Thomas Mitchell, 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 David 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.

Keep posting this good stuff Karen, I love reading it.

Specializes in Vents, Telemetry, Home Care, Home infusion.

Thanks, Oramar

I try to post insurance issues from arround the country, and esp PGH area as I know your interested and my agency works with these insurance companys.

If anyone else from around the country is interested in specific insurance companies/states let me know as much info gleemed from web site which I get Mon-Fri. Big changes being planned by the Blues in the south area. Don't want to turn off too many readers. We need to know what is happening with insurer's these days so can be proactive for clients.


Specializes in CV-ICU.

NRSKarenRN, do you also get info on HMO's here in the Midwest? How about hospital corporations? Because of the contract settlements here in the Twin Cities and what the different corporations have told the nurses; I'd be very interested in some financial information on these corporations. One of my friends had their coffeepots removed from the lounge because of cost cutting after the strike! Can you believe THAT? It is so bizarre the ways that some of these corporations are reacting (or punishing!) since contract negotiations!

Specializes in Vents, Telemetry, Home Care, Home infusion.

Jenny P:

Most of my info re insurance companies is from web site. It is a free site for the first year, Look under managed care on this site.

What insurers are big in your area, and I'll keep them in mind.

I keep up with insurance changes to advocate for clients as intake RN. We are responsible for verifying eligibility and obtaining initial authorization for home care; knowing which insurances we have active contracts with and which companies are still in business! We cover PA, NJ and north Delaware processing approximately 800 new referrals each month.

Additionally, per JCAHO standards we are requiried to verify that ALL doctors licences are current, not expired and now we even have to check that no MC sanctions are imposed BEFORE we admit a client. New Jersey does a good job getting this info out to home care agencies. PA is 1 year behind. One of our agencies had to payback MC funds as DR had sanctions against him, unknown to us. Thankfully, we have a entry clerk that does this. I assist by getting new Docs license, UPIN #s, mailing address and correct phone #'s if I don't recognize a name. We developed an insurance verification specialist clerk position who does much of this checking, with myself and supervisor as final troubleshooters. Since I oriented Maria last August, our rate of problem insurance claims is less than 2% since insurance verification is done prior to admission and way before billing.

It's suprising how many persons don't know what insurance they have or that their policies are not in effect. I aggressively followup all cold calls from people calling re " I need a nurse, I'm sick". Today, i advocated for a 90 YO woman who fell 10 days ago and fractured left leg, casted 10 days ago; NO homecare arranged. Today she fell again trying to get out of chair and

fractured right arm, seen by orthopod and sent home---again NO home care....took 20 min for dtr to get story out, contacted PCP, of course away for 10 days, DTR doesn't kjnow orthopod's name cause brother took mom to Drs. Thankfully PCP nurse stated doc will sign plan of treatment on return and agreed to RN, and PT with eval for OT, HHA and MSW---pt totally independent before fall now incontinent, no wonder!

Specializes in CV-ICU.

That sounds like a very interesting job; it is too bad that the patient is the one who must suffer like that. How could they send a 90 y/o home without a homecare referral? I know, some people just slip through the cracks, but that is so sad.


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