Blue Cross ekes out profit despite ACA losses

Posted February 26, 2016

— Blue Cross Blue Shield of North Carolina returned to profitability last year, despite increasing losses on health plans purchased under the Affordable Care Act, officials said Friday.

The state's largest insurer posted net income of $500,000 one year after losing $50.6 million. Its annual revenue increased from $8 billion to $8.2 billion.

"In the year to come, our focus is to make sure our plans are sustainable for our business and for our customers," Gerald Petkau, senior vice president and chief financial officer, said in a statement. "The environment remains volatile, and medical claims and expenses continue to increase. ACA plan losses grew this year and led to overall operational losses."

Blue Cross lost $282 million on plans purchased through the marketplace last year, more than double the $123 million in losses on those plans in 2014. Petkau said the 2015 losses were offset by gains in other health plans and from investment income.

Claims and medical expenses continue to climb, from $6.4 billion to $6.5 billion, led by specialty pharmacy drugs, orthopedic procedures, cardiology procedures and cancer treatment, officials said.

People on ACA plans account for a less than 10 percent of Blue Cross’ 3.9 million members, but officials said they are older and sicker than other customers. They consumed lots of medical care across the board, including inpatient and outpatient treatment, professional services and prescription drugs, officials said.

Blue Cross officials said recently that they are reviewing their participation in the federal marketplace in 2017, noting that they cannot continue to sustain such losses. The company has raised premiums on the marketplace plans by more than 30 percent this year in an effort to stabilize its costs.

"All options are on the table, ranging from continuing as we have in all 100 counties, reducing that service area and changing further product offerings to withdrawing from the ACA completely," Petkau said.

The company is the only insurer that provides health plans through the online marketplace in all 100 North Carolina counties – UnitedHealth and Aetna's Coventry Healthcare provide plans in parts of the state – and it accounts for more than half of the 613,000 enrollments under the Affordable Care Act statewide.

The insurer's reserves in 2015 were 3.2 months of claims and administrative expenses, down from 3.6 months in 2014. State law requires insurance companies to maintain reserves equal to three to six months of claims and expenses.

Blue Cross paid $372 million in federal, state and local taxes last year, up 39 percent from the $266.7 million paid in 2014.

In a separate filing with the state Department of Insurance, Blue Cross reported that six of its executives made more than $1 million each in compensation in 2015. President and Chief Executive Brad Wilson made $3.8 million, up 34 percent from his 2014 earnings.

The following executives also earned more than $1 million in annual salary and bonus:

  • Maureen O'Connor, executive vice president of Mosaic Health Solutions – $1.96 million, up 30 percent
  • Petkau – $1.86 million, up 26 percent
  • Alan Hughes, chief operating officer – $1.77 million, up 57 percent
  • John Roos, chief sales, marketing and communications officer – $1.52 million, up 30 percent
  • Nathan Prather, general counsel – $1.25 million, up 34 percent

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  • Jennifer Hulford May 31, 2016
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    Have you ever heard of a major national company hating that they just got millions of new customers? And with years of warning? Something's fishy.

  • Tracy T. Dalrymple Feb 29, 2016
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    Just returned from a much needed vacation to see surprise here! We are lucky enough to be on a "grandfathered" plan but paying a premium of 1 1/2 times our mortgage payment. I have had to call every week for the last four weeks because our February payment hasn't posted to our account. I have proof the payment was received via the bank, but BCBS keeps notifying me my payment is late. I realize this is nothing compared to what so many people have had to deal with. If the execs at BCBS really cared, they would have foregone their bonuses. We need changes in the way insurance can be purchased....I'd like to see the ability to purchase out of state.

  • Barrett Powell Feb 27, 2016
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    In what other industry are you forced by the government to buy a company's services at any cost, hear them complain about losing money, while giving each other at the exec level obscene pay raises?

  • Anita Harris Feb 27, 2016
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    I'd like to call BS on BCBS. Since ACA came into being, my BCBS monthly premium has gone up 62%, from 2014 until now!!

    I guess I'm paying for all those who are receiving subsidies or those who would rather incur the fine.

  • Matt Nickeson Feb 27, 2016
    user avatar

    View quoted thread

    You do know that it is called "insurance" right? The point has always been that it protects you against catastrophic loss, not that it would provide for your every healthcare need. You can also use your own money, or even an HSA to protect your money from the tax collector, to pay for only those services that you use. So, there you go, you can negotiate your own prices. It's also not like anyone is forcing you to buy insurance....wait, never mind, the ACA did that.

  • Jennifer King Feb 26, 2016
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    Of course they did. My premiums went up $200 a month this year for the same coverage...

  • Christine Myers Feb 26, 2016
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    How about getting a computer system that works? Nothing like paying big bonuses to company executives when you can't even verify coverage for somebody who bought a policy from you. Hard to believe anybody feels sorry for NC Blue Cross right now.

  • Janet Ghumri Feb 26, 2016
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    What brainiac felt justified in (almost) doubling the 'compensation'for those fat cat executives? ?
    Awfully hard to feel sorry for them when they raised the premiums appx 30% for those people they insure, and shovel out that kind of dough for the higher echelon?
    Quit yer belly aching! Don't complain about your customers USING the service you SELL them.
    Maybe if you took your problem up with the Drug Companies, who are the biggest drain on your bottom line, we could all be better off. But you would have to get out of bed with them first

  • Robert Fotch Jr Feb 26, 2016
    user avatar

    They should change the name to unaffordable care act because that's exactly what it is. I have the best insurance my company offers and still have to pay 1000 deductable, which doesn't include copays and premiums, before the insurance picks up any of the tab. Complete BS is what it is.

  • Sheryl Fowler Feb 26, 2016
    user avatar

    This information makes me sick to my stomach. How can they whine about losses and then pay their executives millions of dollars? Destroying company goodwill, and fast. Wasn't this company, at least at one time, a "nonprofit"?