Insurance Department of the Commonwealth of Pennsylvania Determination
The determination addresses the applications of Capital BlueCross, Highmark Inc., Hospital Service Association of Northeastern Pennsylvania d/b/a Blue Cross of Northeastern Pennsylvania and Independence Blue Cross for approval of reserves and surplus. It includes findings of fact regarding the identity of the applicants, background information, and department procedures. The discussion covers relevant insurance concepts such as reserves and surplus, sources of risk, the rate process and surplus considerations, uses for surplus, and the appropriate use of Risk Based Capital (RBC) as a tool. It also introduces the analytical framework used, including proper corporate unit to review for capital adequacy determination, consolidation and RBC, and additional alternative models. Finally, it applies the framework by evaluating the relative risks of the four Blue Plans using RBC, consolidated risk factor analysis, and actuarial analysis of the Blue Plans' relative underwriting risk.