| Capital Blue Cross and Highmark Inc., parent of Pennsylvania Blue Shield, stand accused of hoarding hundreds of millions of policyholder and member dollars, according to a lawsuit filed in York, Pa.
| Highmark's excess surplus |
| 2000 claims and expenses incurred |
$5,838,491,398 |
| Surplus recommended by BCBS Association |
25 percent ($1,459,622,850) |
| Actual surplus (reserves) |
$2,026,821,822 |
| Excess surplus under BCBS Association standard |
$567,198,972 |
| Source: Herman vs. Highmark |
According to the suit, filed June 29, 2001, the health insurers took advantage of their tax-exempt status as non-profit organizations to build up a corporate "war chest" for acquisitions, mergers, and excessive compensation to their officers and directors, at the expense of their policyholders and the charitable purposes required of them by state law.
"These two companies have accumulated surpluses, not for their social missions, but to wage war on each other," says Gregg Mackuse, one of the lawyers suing both insurers.
The lawsuits, which seek class action status, allege that both Capital and Highmark accumulated huge surpluses in reserves, which the insurers claimed was to provide security in the event of financial or public health crises, but were in fact far higher than the guidelines set by the National Blue Cross and Blue Shield Association.
The two insurers are required under Pennsylvania law to provide the best insurance coverage at the lowest possible rates, and to insure those who can't afford health insurance, in return for their non-profit status, according to Mackuse.
| Capital Blue Cross' excess surplus |
| 2000 claims and expenses incurred |
$1,339,529,900 |
| Surplus recommended by BCBS Association |
25 percent ($334,882,475) |
| Actual surplus (reserves) |
$536,054,457 |
| Excess surplus under BCBS Association standard |
$201,171,982 |
| Source: Herman vs. Capital Blue Cross |
The complaints also allege that the two health insurers acted as non-profit organizations "in name only" and that they have treated their respective surpluses as "property of the company rather than funds which exist solely to benefit policyholders."
Michael Weinstein, a spokesperson for Pittsburgh-based Highmark, asserts that the insurer acted within the guidelines of the Pennsylvania Department of Insurance (DOI).
"As a non-profit, we're very strictly regulated by the [DOI]," says Weinstein. "We take our non-profit status and social mission very seriously."
Joseph Butera, a spokesperson for Capital Blue Cross, of Harrisburg, Pa., said that his company had not received the complaint, but maintained that it is in full compliance with the law.
The plaintiffs named in the case are all chiropractors, chiropractic clinics, or their employees, and are all covered under insurance plans operated jointly by Capital Blue Cross and Highmark.
"The chiropractors are coming at this from a unique standpoint — not so much as providers, but as members of the health plans" says Mackuse.
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