"How much is too much?" More specifically, what is "Excess Surplus?"

That's the question state Insurance Commissioner Mike Kreidler is wrestling with, and it may work its way into legislation when lawmakers descend upon Olympia.

Proponents of a cap say non-profit health insurance carriers like Premera Blue Cross, Regence BlueShield and Group Health Cooperative are making too much money, posting record surpluses while health care premiums continue to rise. They may want to limit the companies' reserves to two months of claims expenses - everything over that would be refunded to policyholders.

On the surface, this may seem like a good idea. In reality it is not.

For one thing, this is just a backdoor attempt at price controls - and price controls never work. In fact, they invariably lead to shortages and higher prices. In 1973, gasoline was 30 cents a gallon when President Nixon imposed rationing and price controls. Five months later gasoline was $1.20 a gallon. Nixon junked the plan.

Secondly, the state doesn't cap profits or excess revenues for other businesses, why health insurance? Yes, insurance is important, but so is food. Why not cap grocery prices? Or doctors' fees? Or lawyers' fees?

Finally, just what is an "excess surplus?" What may seem like too much today may be too little tomorrow in an industry fraught with risk.

According to the experts, Washington health insurance companies aren't making too much money.

The key is something called a "risk-based capital ratio." In other words, companies need to keep enough money in reserve to cover unanticipated costs for things like a flu pandemic or an earthquake, and to be able to weather an extended economic downturn. A 2004 study commissioned by the state of Pennsylvania put the optimum ratio at 900 percent. Under the proposed cap, the ratio for Premera would be 368 percent.

Would caps proponents recommend that you and I have only two months' savings put away to protect our families in case of emergencies? I think not.

At a recent legislative hearing on the issue, a union representative chastised business for wanting to limit excess reserves in the state's workers' comp fund while allowing insurance companies to keep unlimited cash. He missed the point because employers have a choice of whether or not to buy health insurance, but they have no choice and must buy workers' comp insurance from the state.

Other supporters say the insurance commissioner and lawmakers need to legislate health insurance profits because there's not enough competition in Washington. Ironically, it has been changes to state laws and punitive regulations which have driven insurance companies out of our state - the sole insurer.

In 1993, 18 insurers sold individual health insurance policies in Washington state. Then the Legislature passed a series of "reforms" mandating what policies insurers could sell, the services they would cover, who could buy them, and when. Even though some of the 1993 reforms were repealed and many have been changed significantly, two-thirds of those health insurance companies have left the state, and four of the remaining insurers have gone into receivership in the last five years.

As things stand today, the competition that drives better products, lower prices and innovation is stifled in Washington. Why not look for ways to encourage more insurance carriers to come into our state and allow the market forces to really work?

Meanwhile, don't make the situation worse for those trying to survive in Washington by trying to guess at what may be too much money in surplus today. They may be sorry tomorrow, when it is too late.

Don C. Brunell is president of the Association of Washington Business and can be reached at donb@awb.org