Mississippi Today has published its investigative report regarding Blue Cross and Blue Shield of Mississippi’s (BSBS-MS) “extraordinarily high” cash reserves and changes to its governance structure that have prevented those reserves from being used to reduce premiums or to pay providers more.
The report found that BCBS-MS is holding $750 million in cash reserves, at the same time as it has raised consumer premiums and refused to negotiate increased payments to the University of Mississippi Medical Center (UMMC). According to the report, BCBSMS increased premiums to small businesses by 13% and to individuals by 16% in January 2020. BSBS-MS’s refusal to negotiate increased payments to UMMC has resulted in a breakdown in contract negotiations with UMMC, forcing UMMC out-of-network. This means that most patients must personally guarantee payment for their treatment at UMMC. When informed about BCBS-MS’s enormous cash reserves, one UMMC patient quoted in the story said: “It’s greed…And it’s said that it’s people’s life at stake.”
The $750 million in cash reserves represents a risk cash capital ratio (the capital an insurer keeps in reserve to pay claims) of 1,578%, well in excess of its competitors and other Blue Cross and Blue Shield plans. The general rules is that insurers should retain a risk cash capital ratio of 300%. The report quotes Brendan Bridgeland, an attorney and director of the Center for Insurance Research, which advocates for insurances consumers as saying: “That is extraordinarily high for a company of that size. It seems like (policyholders) are probably paying more than they should for their health insurance.”
The report also revealed changes that BCBS-MS has changed its governance structure, which has shielded its high cash reserves from scrutiny by its policy holders. BCBS-MS is a for-profit mutual insurance company, a company that is owned by its policy holders. This ordinarily means that its policyholders can participate in meetings to hold the company accountable, for example by using cash reserves to reduce premiums. However, when subscribers enroll in a BCBS-MS health insurance plan, they agree to transfer power to BCBS-MS senior executives unless they file a written revocation with the company. Bridgeland commented for the story that he had never seen such limits imposed by a mutual insurance company: “It runs against any sort of corporate governance recommendations I’ve seen and is very much out of line with best practices. And the reason is because you don’t want to make management completely insulated, which this effectively does.”
BCBS-MS is by far the largest private insurer in Mississippi, with approximately 56% of the market. The second largest private insurer, UnitedHealthcare, has only 17% of the market.
The Mississippi Today report is linked here.