Insurance rises, again

Regence Blue Shield's 19-percent average price increase for individual health insurance is galling. The company says costs are going up, and it's right about that, but given the economic world the rest of us are in, 19 percent is too much.

Every year, medical costs tend to go up a bit faster than most other things, and we are used to that — but not 19 percent. Regence is nonprofit, as are its principal competitors, Premera Blue Cross and Group Health. That means they have no shareholders, not that they don't make profits. They do make them, but instead of paying out some to shareholders, they pile the proceeds as surplus. This gives them money to cover downturns and disasters.

On Dec. 31, Regence had capital and surplus of $890 million, which was enough to cover nearly seven months' worth of medical claims. Four years earlier, it had $346 million, which was enough to cover a bit more than three months of claims. To put it another way, since 2002, Regence's medical and hospital claims have increased by one-quarter and its capital and surplus have increased by six-quarters.

There was a recession in 2002, and it is a good thing that Regence is stronger financially now than it was then. But the goodness does not extend to infinity.

Regence's price increase affects 137,000 customers. Individual coverage — in which a person deals with an insurance company or agent — is a relatively small market, but it is important because the prices in it aren't controlled by the state.

They used to be, but in the late 1990s, the state's rules of coverage were so stacked toward the buyer that Regence, Premera and Group Health refused to sell any more individual coverage. In 2000, Gov. Gary Locke reached a deal with the three carriers, and they set up the current arrangement, allowing them to make money and the market to reopen.

It worked. But over the past few years, the increases in profit, capital and surplus have begun to suggest it may have worked too well.

A year and a half ago, Insurance Commissioner Mike Kreidler held hearings to discuss the increases in carrier surplus. A study was commissioned, and finished, and it didn't say a whole lot. In 2005, a bill was introduced to give Kreidler the power to review rates. It passed the House but not the Senate. This year, Sen. Karen Keiser, D-Kent, introduced it again, and it passed the Senate but not the House.

When the bill came up this year, the companies testified that the market was competitive and didn't need it. Shortly after the Legislature adjourned, and the pressure was off, Regence announced the 19-percent increase. Kreidler was furious, as you might expect.

Price regulation is not an ideal answer, but raising prices by 19 percent is asking for it.