The Commonwealth Court of Pennsylvania ruled on December 29, 2005 that a group of policyholders, subscribers, public interest groups and the City of Philadelphia did not have standing to challenge the Pennsylvania Insurance Department’s approval of reserves and surpluses for the State’s Blues plans, i.e., Capital Blue Cross, Highmark, Blue Cross of Northeastern Pennsylvania and Independence Blue Cross.

Collectively, the insurance plans are maintaining over $4 billion of insurance reserves. This case started back in 2002, when the Pennsylvania Insurance Department implemented an approval process for determining whether the Blues plans had accumulated excess surplus, and therefore might be required to use surplus to reduce premiums. During the review process, the Insurance Department received over 300 public comments from individuals, policyholders, subscribers and various public interest groups expressing “concern and outrage” at the multi-billion dollar surplus.

The Insurance Department ultimately approved the insurance plan’s applications to maintain the reserves. The Plaintiffs then filed legal challenges arguing that the maintenance of the surpluses was excessive, and that the surpluses could be used for coverage of individuals without health insurance or to provide more affordable health insurance.

The Commonwealth Court decided this case on a procedural issue stating the “the essential issue in this case is whether (the Plaintiffs) have a right to a full blown, due process hearing.” The Plaintiffs argued that they had standing as policyholders because the rates they were paying were property rights which were protected by the State Constitution.

The Commonwealth Court concluded that policyholders do not have a property right to maintenance or reduction of their premiums and that, even though public interest groups have identified social needs which could be addressed by those reserves, those needs also were not identifiable property rights. See Philadelphia v. Pennsylvania Insurance Dept., No. 533 C.D. 2005.