I have previously written that “mutual” insurance companies do not have shareholders.  Therefore, any excess profits are regarded as “Surplus” and is owned by Policy Owners, on a pro-rata basis.  Also, from time-to-time, that Surplus can be distributed, generally on a tax-free basis.  (As always, refer any tax questions to your accountant.)

Insurance, in general, is regulated individually by the States in which it operates.  So, a major company, like Blue Cross-Blue Shield, which provides Health Insurance, has separate operating subsidiaries in each of the states in which it offers insurance.  Also, some of the trends that one subsidiary employs are often copied in other states, as well.

To me, this is a somewhat convoluted problem in the insurance Industry.  There is not an overall regulatory authority for a company with multiple operating subsidiaries.  Also, something that might seem questionable to one State insurance Commissioner, might not even be noticed by another.

The BC-BS operating in Florida, a mutual company, is trying to make a case for forming a for-profit company (in Florida) and transfer the $1.25 Billion Surplus from the Mutual Arm–the policy owners money–to fund the new for-profit arm.  And, if Big blue is trying it here, it might be trying the same tactic in your state, as well.

So, why should it use policy owners money to fund something which will have large executive compensation packages and have to answer to the separate group of shareholders.  If you have Blue Cross-Blue Shield, which is also quite active in the Medicare market, you might want to seriously review any material regarding such a shift–OF YOUR MONEY. (Highway robbery?)  Review it carefully before signing your approval.  TELL YOUR FRIENDS TOO?


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