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Blue Cross profits soar as losses on ACA policies fall

Posted March 1

— Blue Cross Blue Shield of North Carolina lost far less last year on health plans purchased under the Affordable Care Act, which helped boost the insurer's profits, officials said Wednesday.

After losing $282 million in 2015 on plans purchased through the HealthCare.gov marketplace – and $123 million in 2014 – Blue Cross lost only $38 million on those plans last year, Senior Vice President and Chief Financial Officer Mitch Perry said.

"We feel like we're getting to know our customers better," Perry said, which helps Blue Cross better price the ACA plans and budget for claims.

The lower losses helped the company net $185 million last year, up from $500,000 in 2015, despite the fact that its annual revenue dropped by about 5 percent, from $8.2 billion to $7.8 billion.

The decline in revenue was blamed primarily on a 4 percent decline in overall customers. Perry said Blue Cross lost about 150,000 customers from a combination of increased competition for non-ACA business and higher premiums on ACA plans that likely drove people out of the market.

Blue Cross is the only insurer to provide ACA coverage in all of North Carolina's 100 counties, and Perry said the company hasn't yet decided whether to continue offering plans statewide in 2018.

"There's a lot of uncertainty," he said, noting discussion in Congress to repeal or significantly alter the health care law. "If we can make the decision that it's sustainable and affordable, we'd like to stay in."

Because UnitedHealth and Aetna pulled out of the North Carolina marketplace for 2017, Blue Cross has almost doubled its ACA enrollment, to close to 500,000 people, he said.

The company's ACA customers remain older and sicker than its other customers, Perry said, noting their medical expenses were 65 percent higher than non-ACA customers under age 65.

Although overall medical claims dropped from $6.5 billion in 2015 to $5.8 billion, prescription drug costs and payments for orthopedic procedures, cardiac care and cancer treatment continued to climb. Perry said drug costs have doubled in the past 15 years and now account for 22 percent of Blue Cross' medical expenses.

In a separate filing with the state Department of Insurance, Blue Cross reported that seven of its executives made more than $1 million each in compensation in 2016. President and Chief Executive Brad Wilson, who recently announced he would retire later this, made $3.5 million, down 8 percent from his 2015 earnings.

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

  • Gerald Petkau, senior vice president and chief operating officer – $1.76 million, down 6 percent
  • Maureen O'Connor, executive vice president of diversified businesses – $1.69 million, down 14 percent
  • Alan Hughes, former chief operating officer – $1.5 million, down 16 percent
  • John Roos, chief sales, marketing and communications officer – $1.32 million, down 13 percent
  • Patrick Getzen, chief actuary – $1.16 million, up 17 percent
  • Nathan Prather, general counsel – $1.16 million, down 7 percent

Hughes resigned from Blue Cross last April after technical problems led to major customer service problems at the company. Some customers were signed up for or billed for the wrong plans, others were provided no proof of insurance and customer service lines were clogged with complaints.

The problems led the Department of Insurance to levy a record $3.6 million fine on Blue Cross last summer.

Perry said the board of directors uses various measures to set executive compensation, and it's "difficult to look at one event or one issue" to determine whether bonuses are warranted.

2 Comments

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  • Clarence Drumgoole Mar 2, 7:20 a.m.
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    Congrats to the CEO big bank account. Trump supporter?

  • Michael Bawden Mar 1, 5:48 p.m.
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    Partial fake news. Did it say anywhere that an increase in premiums for non ACA policies helped offset losses? Did it say how BCBSNC quit paying sales commissions on ACA policies. Did the article say to only sell ACA policy if specifically asked for? Did the article say how the Obama administration begged BCBSNC to stay as an exchange. The CEO resigned because IT systems were crashing trying to keep up with ACA CHANGES.