Just five months after paying a $17 million dividend to its parent company, United HealthCare of New England wants to send an extra $36.8 million to headquarters, raising the ire of some consumer advocates who see this as proof that United is reaping undue profits in the state.
The proposed payment, which requires the approval of Health Insurance Commissioner Christopher F. Koller, wouldn’t come from recent revenue, United says, but rather from surplus accumulated from 1999 to 2003, when the state restricted payouts to the parent, United HealthCare Services Inc.
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At the time, United’s condition was so delicate that the Minnesota corporation had provided a $10 million note to give it some financial security.
In 2004, United repaid the note and also sent $16.5 million in dividends, and in 2005, it paid out another $13.4 million, followed by $17 million last October.
Still, United’s local surplus kept growing, to the point that as of Dec. 31, it was nearly four times the minimum risk-based capital level set by the National Association of Insurance Commissioners. Even after a $36.8 million payout, United CEO Stephen J. Farrell told Koller in a March 7 letter, United would be at more than twice the minimum level.
Koller has questioned the appropriateness of the RBC standard, but an effort to calculate an alternate target surplus level last year was inconclusive, because United has a reinsurance arrangement with a sister company, United Healthcare Insurance Co., that a consultant found makes its financial health depend, to a great extent, on the parent’s health.
Further complicating the issue is that Koller has gotten complaints about United’s claims adjudication practices and provider reimbursement rates. In a notice for a public hearing March 20 on the proposed “extraordinary dividend,” Koller said one of the questions to be addressed is whether those practices are relevant to his decision in this case.
And United has offered a “one-time voluntary investment” equal to 10 percent of the $38.6 million payout to support Rhode Island health care and technology development initiatives, such as a health information exchange project, electronic medical records development, a chronic-care initiative, and the work of the Rhode Island Quality Institute in particular, for which competitor Blue Cross & Blue Shield of Rhode Island has provided substantial support.
But Craig O’Connor, lead advocate for Ocean State Action, said all of the money should stay in Rhode Island and benefit local consumers. The proposed payout, he said, “is sucking money out of the system, and that’s part of why health care costs so much.”
