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Published July 24, 2010, 12:00 AM

Regulator: Blue Cross reserves OK

BISMARCK – Blue Cross Blue Shield of North Dakota has maintained reasonable financial reserves since the state Insurance Department ordered the company to pay $26.5 million in refunds four years ago, Insurance Commissioner Adam Hamm said Friday.

By: Dale Wetzel, Associated Press, Associated Press Writer

BISMARCK – Blue Cross Blue Shield of North Dakota has maintained reasonable financial reserves since the state Insurance Department ordered the company to pay $26.5 million in refunds four years ago, Insurance Commissioner Adam Hamm said Friday.

Consumers Union, a New York-based nonprofit organization, issued a report Friday that suggested Blue Cross and Blue Shield organizations should use their financial reserves to moderate health insurance premium increases.

The report reviewed the finances of Blue Cross Blue Shield organizations in 10 states. North Dakota was not included. Hamm said comparisons between states should be viewed skeptically.

“It’s kind of state-by-state dependent,” Hamm said. “We have to look at the facts and circumstances in North Dakota.”

The Fargo-based health insurer said Friday it had $228 million in reserves on June 30. Since 2005, its reserve amounts have ranged from $195.8 million to $236.3 million, according to the company.

During the same time, Blue Cross Blue Shield’s risk-based capital score, a measurement of the company’s financial strength, has fallen from 722 percent in 2005 to 523 percent on June 30, according to the company and the state Insurance Department. The Blues would draw increased scrutiny from state regulators if its score dropped below 200 percent.

Hamm said the insurer’s surplus gets a fresh look each time Blue Cross Blue Shield of North Dakota files for an increase in its health insurance rates. It is one factor in deciding whether the proposed increase should be cut back or granted at all, Hamm said.

“We don’t want to see it drop too far because obviously surplus is necessary to make sure there’s a cushion,” Hamm said. “You want to make sure they’re financially solvent so that benefits can continue to be paid.”

Hamm’s predecessor, Jim Poolman, ordered the company to pay $26.5 million in refunds in 2006 because Poolman believed the insurer’s surplus had become too large. More than 17,000 refunds went to individual policyholders, while almost 5,500 refunds were paid to insurance groups, said Denise Kolpack, a Blues spokeswoman.

Blue Cross Blue Shield tries to maintain a surplus equal to two to four months’ worth of insurance claims, the company said. When reserves exceeded that target, the refunds were ordered.

Uncertainty prompted by recent federal health care overhaul legislation makes it especially important to have a robust reserve, the company said in a statement Friday.

“Adequate levels of reserves ensure that (Blue Cross Blue Shield of North Dakota) can remain financially sound in the event of operational losses, sharp increases in health care spending or unexpected catastrophes like an epidemic,” the statement said.

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