"Non- Profit Health" Insurance companies are not non-profit.

[Paper Roses]

So says a spokesperson from one of them. I must admit, her answer to a question posed by a participant surprised me.

I went to a meeting a few days ago, held to inform Medicare recipients about supplements to Medicare. Several of the big Insurance companies are holding them locally to inform Seniors about options.

One lady in the audience, who was really angry about the cost of insurance, questioned the constant price increases. She asked why BCBS was called non-profit when they are building huge office complexes, paying large salaries and generally spending huge amounts of money on non-insurance expenditures.

The answer from the Rep?

We are non-profit because we do not have shareholders. Of course we make a profit but the profit stays within the company. We pay large salaries because that is how we attract the talent needed to run the business.

OK folks, the answer shocked me. Why are they given non-profit status when clearly they make a profit?

Non-profit? Not at all. I think they need a new moniker. Many of us thought that non-profit means what it says. I thought the premium monies went out to pay claims. Not so, if she is correct.

That is why we see huge new buildings, huge advertising campaigns, huge salaries. Got to use up those dollars. Deny claims? Maybe there is no money to pay them. Need to give the boss a raise.

[dixiegrrrrl]

1. So by her definition, all private companies are non-profit.

the Dollar General Store, for example, is doing well in this economy, is privately held.


Maybe Bush changed the definition of non-profit and we did not notice.

[pnwmom]

2. Many BCBS insurers have been converted to FOR-PROFIT status and are publicly owned.

http://www.consumersunion.org/conv/conversions_101/nonprofit_health_sector_history_and_trends/index.html

Nonprofit Health Sector: History and Trends
The greatest nonprofit conversion activity to date has been in the health care industry. No other group of nonprofits has experienced such a dramatic shift in resources from nonprofits to for-profits. When the trend first began, regulators were often unwilling or unable to become involved in the conversion transaction. Without strong oversight, the early years of health care conversion activity resulted in the loss of millions of community dollars and vast health resources to the for-profit sector. Many of those dollars ended up in the hands of former executives, board members, and employees of the nonprofit as well as private investors. Rarely were the transactions and documents made public.
In the late 1980s and early 1990s, after watching their communities lose millions of dollars that should have been earmarked to further the nonprofit mission, a handful of regulators and consumers gradually joined the conversion debate. Several states passed health care conversion legislation to protect the public’s interest in conversions. The first conversion transaction to capture national attention was Blue Cross of California’s attempt to transfer its nonprofit assets to a for-profit subsidiary without preserving those assets for the public’s benefit. As community members learned about the transaction, they formed a coalition and called on regulators to prohibit the conversion unless community assets were protected. The California controversy lasted more than three years. Although initially the nonprofit board of directors and its executives denied their public obligations, by the time regulators signed off on the transaction (PDF) in 1996, more than $3 billion in nonprofit assets had been set aside in two charitable foundations dedicated to health care. The community groups’ efforts paid huge dividends. Today, these two foundations together make over $200 million in grants each year to improve access to quality health care for Californians.
At the request of Blue Cross of California, the National Blue Cross Blue Shield Association changed its by-laws to allow its members to become for-profit health insurance companies. This had a domino effect on other Blue Cross and Blue Shield plans. Soon after Blue Cross of California proposed its conversion, health plans in Missouri, Colorado, Georgia, and Virginia sought to convert. In some of those transactions, state regulators and the community succeeded in enacting legislation or improving requirements to preserve the assets for the public’s benefit.
But lawmakers and advocates in other states were not so fortunate. In Georgia, for example, Blue Cross and Blue Shield lobbyists convinced the state legislature to permit the nonprofit health plan to convert to a for-profit business without leaving any assets for the community. It took three years and a lawsuit before the community was able to unravel the damage caused by that legislation. Again, the battle was worth it—an $80 million nonprofit health foundation was created in Georgia.

[Hannah Bell]

3. irrelevant to her issue.

[pnwmom]

4. I don't see why, since the subject of the OP was a BCBS insurer,

and the post implied that BCBS insurers were supposed to be non-profit. Unfortunately, that changed a long time ago.

[Hannah Bell]

5. "The answer from the Rep?

We are non-profit because we do not have shareholders. Of course we make a profit but the profit stays within the company. We pay large salaries because that is how we attract the talent needed to run the business."


"Prior to the Tax Reform Act of 1986, organizations administering Blue Cross Blue Shield were tax exempt under 501(c)(4) as social welfare plans. However, the Tax Reform Act of 1986 revoked that exemption because the plans sold commercial-type insurance. They became 501(m) organizations, subject to federal taxation but entitled to "SPECIAL TAX BENEFITS"<7> under IRC 833. In 1994, the Blue Cross Blue Shield Association changed to allow its licensees to be for-profit corporations.<4> Some plans are still considered not-for-profit AT THE STATE LEVEL."

http://en.wikipedia.org/wiki/Blue_Cross_and_Blue_Shield_Association


Unless you think the poster misunderstood or lied about her experience, she was asking a question about a non-profit insurer, not a for-profit one.

[Paper Roses]

6. You are right. , it is about non-profit. Massachusetts BCBS is non-profit.

Policy holders at this meeting were under the impression that the insurance dollars paid somehow went to pay claims. How silly of us.

The huge, fairly new office building in Boston was paid for in non-profit dollars.

The non-profit wording leads the uninformed--like me-- to believe that somehow, some of these companies distributed the premium monies into causes other than their own collective pockets.

These words of the Rep are as exact as I can remember. While I see the need for up-to-date physical plants and appropriate salaries, I, like others have issue with the non-profit wording as it applies to health insurer status.

[pnwmom]

8. BCBS-Mass claims to pay about 10.5 percent in administrative costs such as

office buildings and salaries,

And .02% in "profit" in 2008.

These administrative costs are quite a bit higher than Medicare's but lower than the industry average.

http://www.bluecrossma.com:80/common/en_US/repositories/CommonMainContent/aboutUs/AnnualReport/2008/BCBSMA-Annual-Report-2008.pdf

From the Annual Report:

Blue Cross Blue Shield of Massachusetts is committed to being a
careful steward of the premium dollars entrusted to us by employers
and members. We deliberately keep our profi t margin small—.02% in
2008—so we can maximize what we return to our members in the form
of payments to health care providers and pharmacies. The corporation
consistently returns almost 90 cents of each dollar to our members and
retains, on average, about ten cents to run the business. This includes
compensation, investments in information technology, advertising,
taxes, and offi ce facilities. Our reserves protect members, providers,
and employers, as they help to ensure that we can meet our fi nancial
obligations, even in the midst of market disruptions.

[pnwmom]

7. I wasn't questioning the poster. But it was perfectly easy for me to believe

that the BCBS person wasn't telling the absolute truth.

Guess the years have made me a skeptic.

[HughMoran]

9. I don't know why we don't take over these companies

They should be held by the people anyway - since we can't trust Congress to do the right thing, I think the "people" should simply take over their buildings and not leave until they sign ownership to the people of the USA.

[optimator]

10. thats America

words have no meaning and everything is about fucking people out of their money

[Faryn Balyncd]

11. Sounds like corporate America without the bother of having to finesse shareholders.

[snot]

12. IMPORTANT POINT

that few people seem to get.

Yes, technically, there are non-profit and for-profit companies, and the difference is whether net profits are payable to shareholders.

In reality, both types of company are run by senior executives subject to little or no oversight, which means they can essentially be run for the benefit of senior management.

Moreover, it's the senior executives who have most control over whether their company causes harm to others (e.g., misrepresenting the dangers of their products, or polluting), yet who proportionately benefit most from the corporate shield from personal liability.

This is why companies can and often do rip off their customers, vendors, creditors, and stockholders -- i.e., EVERYONE -- and senior executives can still pay themselves handsomely.

[pnwmom]

13. The definition of profit means the money that is left over AFTER paying for expenses,

including administrative expenses, such as salaries and office buildings.

So you were talking about administrative costs and she was talking about profit -- two different things.

There will always be some amount devoted to administrative costs in any non-profit -- the question is how much. BCBS-Massachusetts claims to spend about 10.5% in administrative costs.