In the wake of Gov. Chris Christie’s proposal Tuesday that Horizon Blue Cross Blue Shield of New Jersey should contribute money from its surplus to a special fund for vulnerable New Jerseyans, the state’s largest insurer released a fact sheet on its reserves.In the wake of Gov. Chris Christie’s proposal Tuesday that Horizon Blue Cross Blue Shield of New Jersey should contribute money from its surplus to a special fund for vulnerable New Jerseyans, the state’s largest insurer released a fact sheet on its reserves.
Among the major points:
- Horizon is required by state law and Blue Cross Blue Shield Association rules to maintain reserves. As a not-for-profit, Horizon’s only source of revenue is the premiums paid by our members.
- In 2005, New Jersey’s state treasurer said a legislative proposal to claim $300 million from Horizon’s reserves for charity care “was illegal and would be mired in the courts for years.”
- Reserves protect our 3.8 million members against risk and ensure we can pay claims when the unexpected happens. That means anything like the cost of a new drug — we spent $135 million on 5,500 pharmacy claims for an expensive new hepatitis C drug in 2015 — or a new mandate, like the opioid mandate that could cost up to $200 million; to a natural disaster like Hurricane Katrina, to a public health crisis like a massive flu outbreak or other epidemic. Horizon’s reserves are no different that the money families keep in their savings account to cover unexpected emergencies and expenses. Financial advisers recommend having three months of household expenses on hand for emergencies. That seems like good advice for the company responsible for protecting the health of 3.8 million New Jersey residents.
- Horizon pays about $10 billion in claims annually to hospitals, doctors, pharmacies and other health care providers — more than any other insurer.
- At the end of 2016, Horizon BCBSNJ had $2.386 billion in capital reserves, about $628 per member, or enough to pay 75 days’ worth of claims.
- Health insurers use a technical measurement, known as risk-based capital, to help determine an appropriate level of reserves. RBC was created by the National Association of Insurance Commissioners, which say it is “a method of measuring the minimum amount of capital appropriate to support an insurance company’s business operation in consideration of its size and risk profile.” Of the major not-for-profit Blue plans nationally, Horizon has the fourth-lowest reserve as measured by the RBC.
- Horizon prudently plans around an RBC range of 550 percent to 700 percent. The company ended 2016 with an RBC of 618 percent, down from 2015’s RBC of 688 percent. The company is projecting an RBC of just 588 percent at year-end 2017. Horizon’s RBC has declined every year since 2013, as we have taken on more members and greater risk. If reserves fall below 500 percent, Horizon becomes subject to BCBSA monitoring.
- The administration reviews Horizon’s rates and gets a detailed analysis of the size and adequacy of the reserves every year. The most recent report was submitted in November, and never has the state Department of Banking and Insurance cited anything negative about the size of our reserves.
- Horizon has maintained an “A” credit rating with Standard & Poor’s due in large part to its current level of reserves. A taking of money would trigger a review, and possible downgrade, of Horizon’s credit.