Good Grief!

Anyone ever heard of a “one-time health care affordability dividend?” This is what Horizon Blue Cross and Blue Shield of New Jersey (Horizon BCBSNJ) will begin distributing:

[New Jersey’s] largest health insurer said Wednesday that health-care costs rose less than expected last year, so it will divide $50 million among small-business customers, senior citizen Medigap members and individual policyholders under age 65. It is unclear when, or if, the latter group will see any money.

This announcement comes at a time when Horizon BCBSNJ is embroiled in contract disputes with two large hospitals (full disclosure–I work for one of these hospitals). Though Horizon BCBSNJ is a not-for-profit, Standard & Poor’s estimated that the company had a 2003 surplus of $865-$875 million. In fact S&P raised its rating on Horizon BCBSNJ on January 21st, “partly because of the company’s enhanced capitalization.” Why does Horizon BCBSNJ have this excess (I’m not sure what the reserve requirement is, but I think it’s lower than $856 million)? Is it all a result of lower-than-expected increases in health care costs? Or could it be because the company has been exploring the idea of converting from a non-profit status (until recently).

I have no idea, and I’m probably not the best person to speculate, considering that my employer may resort to layoffs if negotiations with Horizon BCBSNJ don’t work out. However, using the term dividend in the context of healthcare doesn’t seem quite right. In general we should be paying more attention to not-for-profit health insurers with lots of spare cash lying laying sitting around at a time when coverage is increasingly difficult to afford.

PS To be fair, I should mention that Horizon BCBSNJ is also lowering premiums and increasing benefits to its Medicare program enrollees because of increased government reimbursement (from the Medicare Modernization Act). In this case, the company is simply passing along the savings (as opposed to sharing the wealth of its cash reserves).