I Got the Blues

Recently, I wrote asking whether nonprofits need to take a higher moral ground because of the public’s perception of nonprofits.  If, as so many assume, that the nonprofit sector is all about helping others and making the communities in which we live and work better places for all, oughtn’t we, I asked, adhere to the highest of moral and ethical standards?

Not being naïve, and wanting to be realistic, I am willing to lower expectations of others (though not of myself or those with whom I associate).  But that does not mean I have to give up standards altogether.   Recognizing that there is ample room for debating (which I do not want to do here) the notion of whether being moral and ethical is an absolute—you are or you are not–or allows for degrees—action a is less moral than action b–I do see degrees of immorality in people’s behavior.  I know this by my “appall meter.”  When I hear of the questionable behavior of an individual or organization, my reaction registers on the appall meter.  The further to the right on the meter the needle goes, the more infuriated and appalled I am.

Thanks to a study by Consumers Union (publisher of Consumers Reports), I am practically seething, and definitely seeing red!  Consumers Union looked at the cash reserves of 10 Blue Cross Blue Shield affiliates and found that in 2009, seven—yup, 70%–had a surplus three times the amount regulators say is needed for the organization to remain solvent.  Three times!  And as you no doubt recall, depending upon where you are sitting, if you were a Blue Cross Blue Shield client, starting around 2006, your nonprofit was getting notices of increase in your insurance premium anywhere from 8% to as high as 35%, so I heard.  Gosh, wonder where they got those surpluses?

Lest the reader forget, Blue Cross Blue Shield is, technically, a nonprofit.  (While it has allowed some of its affiliates to convert to a for-profit model, this is not the case of the ten affiliates that Consumers Union studied.)  As such, and as any nonprofit, Blue Cross Blue Shield has a legal and moral responsibility to serve its mission, which in the case of this health insurer is to provide affordable and accessible health care.   And, as is once again true of other nonprofits, Blue Cross Blue Shield has a moral responsibility to run a sound business that allows for long-term delivery of that mission and, equally important, sustainability.  It is unquestionably a best business/nonprofit practice to have six to twelve months of reserve to ensure organizational solvency during lean times. It is not a sound nonprofit practice, however, to garner those reserves on the backs of clients by raising fees beyond a reasonable standard—such as the cost of living.  And at some point, the acquisition of reserves by sticking it to the client becomes morally repugnant.  Those seven affiliates have arrived.

The Blues say it needs such a large reserve to pay its operating expenses, citing, in particular, the cost of accreditation and technological improvements.  I just wonder how many of those nonprofits that paid Blue Cross Blue Shields increased rates needed to dip into their reserves when it came time to pay its accreditation fees or the cost of making technological improvements.  Or did they forego seeking (re-)accreditation and/or make do with the current technology available to them because their reserve policy prohibited them from touching that money or, worse, they had no reserves in which they could dip?

Let’s be mindful:  Blue Cross Blue Shield is not alone.  There are other nonprofits out there that are protecting themselves at the cost of their clients, and therein forsaking their missions.  But at some point, word gets out, and the needles on the appall meters of Americans everywhere start moving to the right. What will reserves buy then?