Interested in finding out where and how your insurance premiums are spent? Good luck with that. According to provisions of the Affordable Care Act (Obamacare), a health insurance company must spend 80 percent of the premiums it collects on medical claims.
But finding out what any insurance company doing business in Idaho actually does with its money is a nearly impossible feat, because of a little-known state law that allows insurance companies, even nonprofit insurance companies, to keep their finances private.
The amount of financial information that any business entity must publicly divulge will vary, according to the structure of that entity. Privately held for-profit companies, for example, generally have to reveal very little information. Publicly traded companies, on the other hand, have to be more transparent to protect the interests of investors.
In accordance with federal law, nonprofit groups have to report quite a bit of financial detail to the IRS, information which the IRS in turn makes available to the public.
“A nonprofit group must disclose to the IRS the identities of their organizations’ officers, directors and trustees,” said Dallas Millington, a CPA with the Collaborative Solutions accountancy firm. “Along with that, a nonprofit must also report the salaries of their five most highly compensated employees earning $100,000 a year or more.”
But while a section of Idaho state law that was adopted back in 1961 requires insurance companies—both for-profit insurance companies and nonprofit insurance companies—to report their financial data to the state every year, the state, in turn, keeps this information confidential.
According to Millington, this state law supersedes the federal disclosure laws regarding nonprofit groups. “Sections of the IRS code actually defer to state law, if and when state law is different from the federal law,” he explained. “This appears to be one of those situations.”
The companies whose insurance plans are bought and sold via the Idaho government-run health insurance exchange include Regence Blue Shield of Idaho, Blue Cross of Idaho, Bridge Span Health, Pacific Source Health Plans and Select Health of Utah. Because of the Idaho state law that allows their finances to remain a secret, none of these companies must, for example, disclose the compensation rates for their executives, something they would otherwise have to do in accordance with IRS law.
“This needs to be looked at,” commented Rep. Gayle Batt, R-Wilder, when asked about the implications of the state’s insurance law. Batt serves on the House Business Committee, the committee that reviews legislation involving both banking and insurance issues. “Given constituents’ concerns about the inequities of rising insurance costs, we may need to take another look at this law.”
House Majority leader Mike Moyle, R-Star, views the situation similarly to Batt. “In this new world of insurance exchanges and Obamacare, I think it’s in the best interests of Idahoans that this information about insurance companies be made public.”