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Some Question Why Blue Cross Will Not Reduce Premiums Despite Record Profit

Posted November 12, 2004

— Blue Cross Blue Shield Of North Carolina

executives said the nonprofit company needs profit to compete and grow, but after a record 2003, they have actually worked to trim back their net income, down to $145 million so far this year. While rate increases dropped from double to single digits, Blue Cross leaders tell WRAL to not expect that profit to ever go toward lower premiums.

From the blitz of Blue Cross commercials to the free offering of generic drugs to thousands of free flu shots, North Carolina's largest insurer is spending millions to improve its image.

"With the kind of profits nonprofit Blue Cross is making, they could afford to really lower people's rates and not just sink profits into other ventures," said Adam Searing, of the North Carolina Health Access Coalition.

"I think it's just like any other investment. We're going to get a payback," said Dan Glaser, financial officer for Blue Cross Blue Shield.

Instead of burning profits on health care freebies, Blue Cross executives contend higher medical costs, investments in technology and lower premium increases led to the company's 16 percent drop in net income.

When asked about pushing for lower premium decreases, Glaser said, "Premium decreases are kind of impossible when you have medical costs going up."

Searing said even though Blue Cross no longer enjoys tax advantages, the nonprofit can afford to cut rates.

"They enjoyed 70 years of tax breaks. All those have made them the 800-pound gorilla that they are today and we really should ask for something in return," he said.

Despite the criticism, Blue Cross Blue Shield leaders argue long-term customer growth and stability outweigh rebates and rate reductions.

"You want Blue Cross there when you need it. You don't want it to have problems in finances," Glaser said. "You don't want it to have problems delivering what you need and that's what financial stability is all about."

Blue Cross Blue Shield took heat when executive salaries jumped last year. Chief Executive Officer Bob Greczyn saw his compensation nearly double to more than $2 million a year. Even with higher profits, Glaser warns rising medical costs could increase premiums at an even higher rate next year.

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