Blue Shield of California Hoarding Cash in Anticipation of Obamacare

Blue Shield of California wants to impose another rate increase on their policyholders by a whopping 20%.  Consumer advocates are up in arms, and are accusing the insurance giant of hording cash. State law requires this company to have on hand reserves of $218 million to cover claims.  The company itself has mandated a risk capitalization rate of 375%. 

Many are wondering why Blue Shield needs such high reserves.

Larry Kirsch, a healthcare economist in Portland, Ore., who has studied surpluses at other Blue Cross and Blue Shield plans, said not enough regulators nationwide require nonprofit plans to justify their rationale for hoarding so much cash at a time when many consumers and small businesses are struggling to afford health benefits.

"There ought to be a reasoned analysis for when is enough," Kirsch said. "There always seems to be a 'sky is falling' story. I say prove it to me."

You need proof Mr. Kirsch?  Here it is:

Blue Shield said its reserves have nothing to do with rate increases, and that money has been put aside for the future benefit of its policyholders.

"Reserves are needed to ensure our members' claims can be paid no matter what," said Blue Shield spokeswoman Lindy Wagner. "We need them to protect against uncertainties like a pandemic or another crisis."

The company also expects higher costs from an influx of new customers under the federal healthcare law in 2014.

"It's a once-in-a-lifetime change in the healthcare market that will bring a lot of volatility, and we need higher reserves for that," Wagner said.

Even with these proposed rate increases, Blue Shield said, it expects to lose money in the individual insurance market in 2013

And how will this insurance giant lose money?  Why Obamacare of course.  Twila Brase, president of the Citizens Council for Health Freedom, gave the following warning about this Trojan horse:

“Obamacare requires insurance companies to take everyone,” even those with terminal illnesses who had no health coverage, Brase said. Rather than insurance, she calls Obamacare a third-party payment system with the government which insurance carriers will get preferential treatment.

“The biggest ones win,” she said “They will get all the money from the government and they will be doling it out, but they won’t be private entities anymore,” but more like regulated utilities.

Anymore questions, Mr. Kirsch?

 Source:  http://www.latimes.com/business/la-fi-blue-shield-rates-20121213,0,6546740.story

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