Judges’ comments: An ambitious and courageous effort by a small-market newspaper which revealed that South Carolina’s dominant health insurer was flush with reserves and was paying executives and board members handsomely while consistently winning rate increases from less-than-vigilant regulators.
List date(s) this work was published or aired.
May 1, 2011
See this entry.
- S.C. Blue Cross flush with cash
- S.C. regulators question little
- S.C. Blue Cross target of federal investigation
Provide a brief synopsis of the story or stories, including any significant findings.
This article and sidebars expose the domination of Blue Cross Blue Shield in the South Carolina health insurance market and its effect on consumers. Before this report, the insurance giant brushed off criticism as unfounded. Among the newspaper’s findings:
- Blue Cross Blue Shield sits on far more capital reserves than it needs – money that should have been returned to policyholders through rebates or lowered premiums – even as it continually hikes rates.
- The state Department of Insurance does not review rate increases and the agency’s former director (he resigned in December) took a caviler approach to regulation.
- The nine members of Blue Cross Blue Shield’s board of directors have more than doubled their reported salaries in the past year.
- Almost all state lawmakers involved in legislative insurance committees receive sizable campaign contributions from Blue Cross Blue Shield.
Explain types of documents, data or Internet resources used. Were FOI or public records act requests required? How did this affect the work?
Before researching this article, I constantly heard anecdotes about Blue Cross Blue Shield’s monopoly in the South Carolina market. I scoured a variety of records to build a story that showed how the insurance giant got there. They include:
- Insurance companies’ key annual statements (obtained from the National Association of Insurance Commissioners)
- Insurance companies’ compensation exhibits (obtained from the National Association of Insurance Commissioners)
- Compensation study report by Atlantic Information Services
- Financial analysis by Citigroup Global Markets
- South Carolina market share report (obtained from the state Department of Insurance)
- National study on the health insurance industry by the American Medical Association
- National report on health insurance regulation by Kaiser
- Report on state insurance commissioners by Consumer Watchdog
Explain types of human sources used.
My greatest source on this story was a former Department of Insurance employee. She e-mailed me after reading a story I had written about an insurance company’s insolvency. During several phone conversations, she described the intensity of Blue Cross Blue Shield’s influence in the state. When we eventually met in Columbia, she helped me sort through Blue Cross Blue Shield’s financial statements. From there, I contacted local and national consumer watchdogs who pointed out key reports on the insurance industry. I turned to Kaiser for other studies. I relied on Blue Cross Blue Shield to provide annual breakdowns of policyholder numbers. The company’s CEO gave me an interview to defend pay raises and its spokeswoman provided statements about excess capital reserves. The state insurance commissioner defended his department’s industry regulation.
Results (if any).
This reporting shined a bright light on the insurance industry in South Carolina, a topic no other newspaper in the state has approached in depth in recent history. “S.C. Blue Cross flush with cash” made a dry subject interesting and easy for readers to understand and discuss. Other large newspapers in the state published this piece in its entirety. It caused reader outrage, generated dozens of letters to the editor and prompted editorials. The department of insurance, which previously had operated without scrutiny, now is covered regularly.
Follow-up (if any). Have you run a correction or clarification on the report or has anyone come forward to challenge its accuracy? If so, please explain.
No corrections or clarifications. A variety of follow-ups: Blue Cross Blue Shield, which is the target of a U.S. Justice Department antitrust probe, had help from the state legislature in maintaining its dominance, a July report showed. Blue Cross Blue Shield was behind the repeal of a law that stripped the state’s power to regulate contracts between hospitals and insurers, I learned through research at the South Carolina law library. The repeal allowed the insurer to negotiate contracts that hobbled its competitors. Blue Cross Blue Shield gave thousands of dollars in campaign contributions to the legislator who sponsored the repeal. Stories in June and August highlighted complacency in the state Department of Insurance, which is charged with regulating the industry. The department must maintain a balance between keeping policyholders’ premiums priced fairly and ensuring that carriers have adequate capital reserves to pay all the claims filed. The articles showed the department failed on both fronts. A May package examined South Carolina’s progress in setting up a health insurance exchange, showing that consumers were being left out of the debate. It also explored the fine line conservative politicians tread as they juggle implementing the federal law and appeasing the Tea Party supporters who elected them. That issue was at the center of December articles that showed Gov. Nikki Haley dictated the outcome of an independent panel tasked with deciding whether the state should create its own exchange. Haley told a key member of the panel the outcome she expected before the group met for the first time, e-mails showed.
Advice to other journalists planning a similar story or project.
Check out your state’s health insurance market share report. If one company has an overwhelming share, check its “key annual statements” which are available for free on the National Association of Insurance Commissioners’ website. The exhibits on reserves are particularly telling. Is the company sitting on many times the expected level of excess capital? Has it been hiking policyholders’ rates anyway? Also check board pay and executive compensation. The topic of insurance had been severely underreported in South Carolina. The state’s Department of Insurance– tasked with regulating the industry and protecting consumers– has gone virtually without scrutiny for years. I found it plagued with problems, the subject of a half dozen follow-up stories. Is your state’s insurance department effectively regulating the industry? Request a list of insolvencies. What are the ties between your commissioners and industry leaders? Look out for campaign contributions, quid pro quo appointments and revolving doors– I found evidence of all these and more. The South Carolina state law library was an unexpectedly wonderful resource.