Blue Cross ekes out profit despite ACA losses
Posted February 26, 2016
Durham, N.C. — 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 HealthCare.gov 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