Last year, more than $500 million of Montanans' money flowed through the hands of Montana Blue Cross/Blue Shield -- and nearly one-fifth went to what could be called "overhead."

Blue Cross, which insures or administers health benefits for 320,000 people in Montana, also ended 2006 with a reserve of $117 million -- more than double its reserves of just four years earlier.

And, it had eight top executives earning more than $200,000 last year, including President and CEO Sherry Cladouhos, whose salary, bonuses and other compensation totaled $482,500.

Such are the finances at the state's largest health insurer, a nonprofit company that controls 50 percent of the private market and pays no insurance premium taxes or state income taxes.

Are these numbers the norm for a health insurer? Or, put another way, are they what's to be expected for the biggest insurer in a state where 18 percent of the population has no health insurance, in large part because they can't afford it?

Cladouhos and other Blue Cross executives say "yes" -- although they're hardly satisfied that so many Montanans remain without health insurance.

"Our mission is to keep the underwriting gains low, because that keeps premiums low," she says. "It really is a goal of ours to offer affordable health care and to insure the uninsured."

Cladouhos says the company and its 630 employees have been working hard to control costs and keep the price of health insurance as low as possible for customers, including an increased emphasis on "wellness" plans and reducing administrative costs.

By most industry standards, the financial numbers at Blue Cross are not out of line.

It actually lost money on health insurance it sold last year, spending $6.4 million more on claims and costs than it charged in overall premiums. Over the past 20 years, Blue Cross has averaged a 0.6 percent annual loss here, known in insurance lingo as an "underwriting loss."

Blue Cross executives say they try to keep underwriting losses or gains as close as possible to zero over time, meaning they try to collect little more than needed to cover medical claims and administrative costs.

When an insurance company loses money on underwriting, it makes up the difference with income from investment of its cash and reserves.

As a nonprofit, Blue Cross doesn't pay dividends to shareholders, instead taking its "net return" or profit and investing it back into the company. With investment income factored in, Blue Cross last year earned a net return of $6.7 million, or 1.3 percent of its total revenue.

Blue Cross premiums did increase an average of 13 percent last year -- well ahead of inflation. Yet, according to company figures, they went up an average of 4 percent in 2004 and 7 percent in 2005, which was below the national average.

The level of Blue Cross reserves, which are the value of its cash and investment surplus, also are not unusually high, when compared to other insurers or Blue Cross groups in other states.

Still, Blue Cross has often found itself in the public bull's eye in recent years, as the dominant health insurer in a state where 170,000 people are still without insurance and health insurance prices continue to rise.

It is facing increased competition, and, from some quarters, criticism.

In recent years, Blue Cross has lost all or part of several major accounts to competitors, including Allegiance Benefit Plan Management, a Missoula-based health-plan administrator whose president Dirk Visser questions whether Blue Cross reserves need to be as high as they are.

"If you're taking a certain portion of that premium and just rat-holing it, in my mind, that's excessive," he says.

Visser's company was purchased by Blue Cross in the early 1990s, but he bought it back five years ago after what he describes as "irreconcilable differences" with the Blues on business philosophy.

This spring, health-insurance giant Great-West of Colorado bought a majority position in Allegiance, which this summer began offering health insurance that will compete with Blue Cross. Prior to now, Allegiance had competed with Blue Cross only as an administrator of self-insured health plans.

Visser says Blue Cross dominance "has just come along by inertia," rather than from offering particularly good or innovative products.

"If there's just one source (for insurance) out there, it's not good for consumers," he says. "They can say, 'Just take it or leave it.' ... They can under-price a product to eliminate competition and pick it up elsewhere."

Blue Cross came under fire two years ago during the reign of Chief Executive Officer Peter Babin, who was criticized for a lavish salary-and-benefits package worth $1.4 million a year and an aggressive approach to increase revenue, that looked more like the actions of a for-profit company.

Babin resigned under pressure from the board in 2005.

Blue Cross also has garnered some resentment within the industry for using revenues to buy up for-profit insurance agencies, which push Blue Cross insurance in direct competition with agencies whose product-owners pay premium taxes.

Blue Cross owns Western States Insurance, which mostly sells property-and-casualty insurance. But the agencies also pitch Blue Cross health insurance -- and no other health insurance.

Pete Pettersen, a Missoula insurance agent who sells health insurance offered by competitors, says it doesn't seem right that Blue Cross, a nonprofit, uses its strength to "buy out the competition."

"They are the big elephant in the state (on health insurance), and many in the business are questioning what they do with the breaks they receive," he says. "Most of their rates are more expensive than other companies. There's no reason for that, given the gifts they get from the state."

A half-dozen longtime Blue Cross executives also have retired or left the company in recent years, for various reasons.

Among them is Tanya Ask, who was Blue Cross' chief spokeswoman and lobbyist for the last several years and who'd been with the company nearly two decades. She left in April to become a top executive at competitor New West Health Services.

Ask says she sees New West, the second-largest insurer in Montana, as an up-and-coming competitor. New West controls about 7 percent of the health-insurance business in Montana.

"We are looking at new products (that) we have, to make them more attractive and more affordable," she says of her new employer. "Competition assures that prices are fair ... and it does assure that everyone is kept honest."

New West was created and financed in 2000 by several of the state's large hospitals, who felt Blue Cross needed a competitor that would offer different insurance products, like managed care.

Blue Cross/Blue Shield, created by a 1986 merger, began in the 1940s as two separate companies -- one organized by doctors, one by hospitals. They were founded as nonprofits, with income dedicated to helping their "member" customers.

In the mid-1990s, the Blues created a holding company that began buying for-profit companies that had a health-care or insurance-related purpose.

Its largest subsidiary is Western States Insurance Agency, which employs 390 people. Blue Cross also has Health-E-Web, which electronically processes claims for physicians and other health-care providers. It employs 19 people.

Cladouhos and other Blue Cross executives say buying for-profit companies is simply an investment, which any insurance company does with its revenue. Rather than invest in out-of-state stocks and bonds (which Blue Cross still does), the company also wanted to invest in Montana, she says.

Those investments are now paying dividends, helping cover underwriting losses and keep insurance premiums down, she notes.

Profit from the subsidiaries initially was used to pay down debt incurred to buy the companies. Since 2003, the subsidiaries have returned $12 million in investment income to Blue Cross.

Most private health insurers, whether they're nonprofit or for-profit, have an "overhead" of 15 percent to 20 percent of total revenue. Overhead is any expense beyond direct payment of medical claims, such as advertising, marketing, sales commissions, salaries, computer technology, other equipment and "cost-containment" services, such as case management of individuals' expensive health problems or chronic disease.

In recent years, overhead at Blue Cross ran as high as 23 percent, excluding taxes, but dropped to 18 percent last year. Cladouhos and Blue Cross Executive Vice President Terry Cosgrove say the reduction is a direct result of the company board insisting that administrative costs be reduced.

During that time, the company has reduced the number of top executives from 16 to seven, they said.

As for the reserves, Cosgrove says they need to increase to keep up with medical inflation, because reserves are used to pay claims and other expenses.

For example, Blue Cross has used its reserves to invest heavily in new computer software and equipment, to enact a new claims-processing system, executives said.

The $117 million reserve at the end of 2006 included surplus cash and the value of Blue Cross investments, which increased substantially last year. "That's just the net value of our assets," Cosgrove says.

Cosgrove and Cladouhos say Blue Cross has done a number of things to help cut into the problem of the uninsured in Montana. It's often the only company that steps up to help finance or manage new programs that attack the problem, they say.

Blue Cross has been the only insurer or claims-processor for the Children's Health Insurance Plan; it's the only insurer for Insure Montana, which offers subsidized insurance for small businesses; it manages the Montana Comprehensive Health Association, which offers insurance to high-risk individuals.

The company also is sponsoring a wide-ranging health care "summit" in October, where experts from across the country will present ideas for system-side reform.

John Morrison, the state insurance commissioner, says he thinks Blue Cross "generally contributes to keeping rates down," because they have the market power to negotiate contracts with providers on price.

Over the past three years, Blue Cross says its premiums have increased an average of 8 percent, which is close to national averages.

The company acknowledges that it doesn't have always have the lowest price, saying it must base premiums on company forecasts for medical costs and "utilization" of services.

Price and affordability are important to Blue Cross, but so is a good product, which includes good provider networks, wellness programs and paying claims in a timely manner, Cosgrove says.

"If we can keep our percentage of increase of premiums less than usual, that's the steps you'd like to see a company do, to try to keep the premiums down and try to get more people insured," he says.