Independence Blue Cross (IBC) is pleased that the Pennsylvania Department of Insurance has today affirmed that the Company has operated with an efficient surplus that enables Independence Blue Cross to fulfill its mission of providing health insurance to millions of Pennsylvanians.
The Insurance Department, led by Commissioner Koken, gave this important issue a thorough and careful analysis. For that, Independence Blue Cross is appreciative. After hearing hours of testimony and reading pages of filings, the Department today concluded that the surpluses held by Independence Blue Cross and other Pennsylvania Blue plans are critical to the solvency of the Blues.
The Department's Determination found that:
- IBC's surplus is not excessive and that the Company is the only Blue Plan whose surplus is in what the Department views as the optimal range for surplus levels.
- IBC is in an appropriately secure financial position and the Commissioner expressly took the opportunity to assure the Company's members in this regard.
- IBC's diversification of its risk through the use of subsidiaries and affiliates is not only appropriate but encouraged.
- The four Pennsylvania Blue Plans are not created equal. The companies have different levels of risk and different access to capital resulting in the need for a more customized methodology for evaluating surplus levels.
Independence Blue Cross President and CEO Joseph A. Frick said: "We have been steadfast in the belief that our surplus helped us be there for our members when they needed us most. That has been - and always will be - our promise. We hope today's announcement will allow everyone to continue to move forward and work on addressing issues that are vitally important in health care."
In its determination, the Department found that in 2003, IBC had a surplus in an "Efficient" operating range. Efficient is one of three operating categories identified by the Department, along with "Sufficient" and "Inefficient." IBC was the only Pennsylvania Blues Plan to be designated as operating in the "Efficient" range.
IBC is committed to maintaining an efficient surplus, which is critical to the Company's effort to remain financially sound. The Company's surplus conforms to the standards for Risk-Based Capital set by the National Association of Insurance Commissioners and the Blue Cross Blue Shield Association.
As former Independence Blue Cross President and Chief Executive Officer G. Fred DiBona, Jr. said in testifying to the Department in 2002: "As our membership grew and our claims risk grew, our surplus grew - just as it is supposed to grow. Or put another way, every time we made a promise, we put aside money so we could keep that promise. That's sound and responsible business."
Mr. Frick also said: "The rising cost of health care is indeed a concern for all of us. But the Department's determination makes it clear that surpluses held by Independence Blue Cross, and other Blues, are not responsible for those increases. Independence Blue Cross hopes today marks the start of a renewed and focused conversation that ultimately leads us all to a dialogue regarding the quality, accessibility and affordability of health care."
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