According to the Chronicle of Philanthropy and the Houston Chronicle, Blue Cross and Blue Shield of Texas, whose parent is Health Care Service Corp. (HCSC), obtained approval for raising their insurance rates by 20% despite maintaining approximately a $9.9 billion dollar reserve fund, HCSC awarding their CEO a $10 million bonus and HCSC have a net loss of $282 million during the year of 2014. These articles make an implication that Blue Cross and Blue Shield of Texas is operating as a for profit entity and gouging those who are insured by them to pay their officers and employees that are in the higher positions of the organizational hierarchy large salaries and bonuses although they’re considered a nonprofit entity.
What the Chronicle of Philanthropy and the Houston Chronicle failed to mention was insurers in Texas, like Blue Cross and Blue Shield of Texas, must follow Texas regulations requiring these insurers to maintain funds, which are restricted for specific purposes. Noted in Texas’s regulations under Insurance Code Title 11. Subtitle B. Chapter 2551. Subchapter F. Reserves, it notes all the required minimum reserve funds that must be maintained for a variety of purposes. Carl McDonald said “our reserves serve a different purpose and that is to remain in place to protect our nearly 15 million HCSC members and ensure anticipated and unanticipated claims by our members” to defend Blue Cross and Blue Shield of Texas’s nonprofit status. Although due to the 2014 audited financial statements not being available as of today, we checked on the Blue Cross Blue Shield of Texas website for its availability, it is too early to draw conclusions as to whether they should be considered a nonprofit entity or not based on whether the reserve funds being kept are considered reasonable to maintain their nonprofit status under Texas law.
Texas Insurance Code: http://www.statutes.legis.state.tx.us/Docs/IN/htm/IN.2551.htm
Blue Cross Blue Shield Financial Statements: http://www.bcbstx.com/company-info/who-we-are/financial-statements