Lawyers have filed a class-action lawsuit against Oregon nonprofit health insurer Regence BlueCross BlueShield, saying it is acting like a for-profit company by stockpiling excess funds that support large salaries rather than health care for policyholders.
The lawsuit, filed Friday in Multnomah County Circuit Court, asks a judge to rule that Regence is not fulfilling the public-purpose clause of its own bylaws, and is failing to use its excess earnings for the benefit of its members.
"What we see is what they pay their CEOs and how they give them bonuses (based on earnings)," said Darian Stanford, the Portland lawyer who is spearheading the case. "This is what I call white-hat litigation: the right thing to do."
Regence defended its business practices in a statement: "Our values are rooted in always putting our members first and having the financial stability to meet their medical needs, now and in the future. We believe this claim is meritless, and we will aggressively defend these allegations and do everything in our power to ensure assets dedicated to serving our members are not used to enrich trial lawyers."
The suit lists Regence policyholder Tanya March and her two children as plaintiffs as well as Dischinger Orthodontics of Lake Oswego.
The lawsuit comes on top of criticism the insurer has received in recent years for investing its surplus funds in for-profit companies, while cutting benefits and increasing premiums. Regence officials defend their investments as serving members, and say their rate hikes and benefit changes have been necessary to keep the insurer stable.
While Regence is required by the state to maintain a certain amount of reserves, it, like many other insurers, has built up funds well in excess of state minimums.
The lawsuit alleges Regence goes further than other Blue Cross nonprofit insurers – specifically maintaining four months worth of operating expenses, rather than the three months used by other carriers, or about $150 million in excess.
"They should do something to somehow use that money for their nonprofit mission," said Philadelphia lawyer David Senoff, who is assisting Stanford on the case.
The Regence statement defends its reserve levels as appropriate and says its executive salaries are a tiny fraction of its overall expenditures. It says that more than 85 percent of the premiums from Oregonians is paid to providers for care.
Cambia Health Solutions, the parent company for Regence and its sister companies in Washington, Utah and Idaho, does not report total executive compensation that includes income from for-profit subsidiaries, making those figures difficult to ascertain. However, in 2012, Cambia CEO Mark Ganz told The Oregonian he earned $1.94 million.
--Nick Budnick
By Nick Budnick | nbudnick@oregonian.com
Originally published in The Oregonian on June 20, 2014 at 6:17 PM