CHAPEL HILL, N.C. – Poorly conceived and hastily introduced legislation in the General Assembly would undermine the financial stability of the state's largest health insurer and place politics above the health care needs of 3.1 million Blue Cross and Blue Shield of North Carolina (BCBSNC) customers.
House Bill 1412 would require an unconstitutional government confiscation of hundreds of millions of premium dollars set aside to protect BCBSNC members. The bill would use the money, paid by the company's customers, to buy health insurance for the uninsured. This money, currently the safety net for BCBSNC customers, would be required to be paid to the state and administered by a government bureaucracy – the N.C. Department of Health and Human Services.
"Our reserves protect our members in the event of unexpectedly high claims that could be caused by an emergency, such as a flu pandemic or natural disaster," said BCBSNC President and CEO Bob Greczyn. "They also allow us to invest in technology and improvements in customer service.
"Under this legislation, our customers would lose the protection and stability that they expect from their health insurer," he said. "A sudden economic downturn could cut the company's reserves quickly to a level at which we would be forced to raise premiums dramatically, reduce fees to doctors and hospitals, and eliminate jobs, including outsourcing jobs to foreign countries. We do not believe politicians should put our members at risk by commandeering our reserves to pay for government programs."
This bill imposes an untested standard to restrict the company's contingency reserves. It ignores an existing law, on the books and working effectively since 1941, which requires contingency reserves totaling between three and six months of claims and expenses. At the end of 2004, BCBSNC's reserves equaled 3.7 months of claims and expenses, less than its 20-year average of 4.1 months. The proposed legislation uses an untested formula to slash BCBSNC reserves to 2.6 months, using the rest to pay for insurance for non-BCBSNC customers.
"Addressing the problem of the uninsured will take a concerted, broad-based effort by multiple sectors of our society," said Greczyn. "Asking BCBSNC members alone to fund a simplistic solution is neither practical nor fair."
A separate proposal, House Bill 1441, would essentially put the commissioner of insurance in charge of the day-to-day operations of BCBSNC. The bill allows the commissioner to intervene in almost any aspect of the company's operations – a level of micromanagement that no other health insurer or any organization in the state would face (except Delta Dental, which is subject to the same general statutes as BCBSNC). The commissioner already has the authority to regulate BCBSNC premiums and reserves. The bill repeals the time-tested law for determining appropriate reserve levels to protect consumers.
At BCBSNC's current reserve level, its reserves would be wiped out if just eight percent of its insured customers had a $9,400 claim, in addition to normal claims volume. A $9,400 claim is the average cost of a three-day non-maternity hospital stay.
BCBSNC is a fully taxed, not-for-profit medical service corporation and is the largest taxpayer in Orange County and a significant property taxpayer in Durham County. Its overall federal, state and local tax bill totaled more than $135 million last year. The company employs more than 3,600 people.
"At a time when the state is spending hundreds of millions of dollars to lure out-of-state companies and their jobs, we believe it is unwise for politicians to undermine the operations of a stable North Carolina health insurer and employer," said Greczyn.
About Blue Cross and Blue Shield:
Blue Cross and Blue Shield of North Carolina is a leader in delivering innovative health care products, services and information to more than 3.1 million members, including approximately 549,000 served on behalf of other Blue Plans. The company offers its members the Blue ExtrasSM value-added programs, which provide discounts and information on a wide variety of health-related services at no additional cost. BCBSNC also offers life, dental, long-term care and disability insurance products. For 71 years, the company has served its customers by offering health insurance at a competitive price and has served the people of North Carolina through support of community organizations, programs and events that promote good health.
BCBSNC's HMO product has earned Excellent Accreditation from the National Committee for Quality Assurance (NCQA), an independent, not-for-profit organization dedicated to improving the quality of health care. BCBSNC also has North Carolina's first and only NCQA accredited PPO plan – Blue OptionsSM. Blue Cross and Blue Shield of North Carolina is an independent licensee of the Blue Cross and Blue Shield Association. Access BCBSNC online at