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May 16, 2005
District Issues Report on GHMSI Charitable Obligation
While GHMSI does provide funding for community groups in the District that are involved in public health activities, as many witnesses at the hearing testified, the amount (less than $2 million in 2004) falls far short of the $41 to $61 million that Appleseed said GHMSI could contribute, based on its premium volume, and still remain viable and competitive. At issue in the hearing was the size of the GHMSI surplus and the method for calculating how much of that surplus was necessary. The Department's report says: "We find that the $41 million to $61 million that Appleseed asserts GHMSI could safely divest itself of, based on its current premium volume, is not reasonable, and we reject the use of a surplus-to-premium volume measure as unsound and potentially dangerous," because a company with a high premium volume could nevertheless be in serious financial difficulty. The report says that a strong surplus is needed to protect policyholders against unanticipated catastrophes, such as an epidemic or a terrorist attack. "We do not want to see a situation where at the very time an unforeseen event causes substantial losses, such as would happen in the event of an Asian flu epidemic or another anthrax attack, our major health insurer is unable to pay claims because it has insufficient surplus."
At the same time the Department's report concluded that there is no doubt that GHMSI could do more for the community than it is currently doing, based on its strong financial position.
GHMSI is the District's and the region's largest health insurer with 1.2 million subscribers in DC, Maryland and Northern Virginia, including many Federal government employees. Of that number, 132,000 live in the District, 280,000 in Virginia, and 746,000 in Maryland, although most are insured through their employers located in the District.
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