WRAL Investigates

Lawmaker irked by Blue Cross profits

Posted March 5, 2009
Updated March 9, 2009

— Blue Cross Blue Shield of North Carolina's healthy bottom line and hefty executive compensation packages shortchange customers, a state lawmaker charged Thursday.

Blue Cross & Blue Shield of N.C. Legislator criticizes BCBS profits, bonuses

Blue Cross, the state's largest insurer that operates as a nonprofit, earned $186 million last year and paid six top executives more than $1 million each, topped by Chief Executive Bob Greczyn's $4 million income.

"(I think) $186 million in profit is shocking," said Rep. Bill Faison, D-Caswell, who failed in his attempt several years ago to rein in profits at Blue Cross.

"It's money that, in part, is being made by encouraging executives to overprice a necessity, and it just strikes me as wrong," Faison said.

Blue Cross spokesman Lew Borman defended the insurer's financials, pointing out that the company's 3.6 percent profit margin in 2008 was the smallest in at least five years. Profits also were down from $209 million in 2007.

Also, despite its nonprofit status, Blue Cross paid $162 million in federal, state and local taxes last year, Borman said.

Executive bonuses, such as the $3 million bonus paid to Greczyn, were based on record growth Blue Cross saw between 2005 and 2007, he said. Compensation amounts to less than a penny of every $1 in premiums, while 85 cents of every $1 goes to medical costs, he said.

"In fact, (compensation) really doesn't impact the premiums in and of itself," he said.

Blue Cross administers the State Health Plan, which provides medical coverage for almost 650,000 state workers, public school teachers and retirees. Two advocacy groups on Thursday demanded an outside audit of the contract after reports that the company earned $10 for each claim it processed.

Lawmakers expect to spend $300 million this spring to cover the health plan's ballooning deficit.

Senate Minority Leader Phil Berger cautioned against what he calls a knee-jerk reaction to Blue Cross' financials.

"The fact that we've got an insurer that seems to be able to balance its books (and) seems to be able to pay claims on time, that's something to be thankful for," said Berger, R-Rockingham.

Still, state worker Melvin McClain questions how Blue Cross can have profits at the same time the premiums on his health insurance continue to rise.

"I was shocked that they had made so much money (and) that the salaries for executives were so much. But who am I? I'm just a regular worker," said McClain, who works in the Division of Community Corrections.

He has battled Blue Cross for months, seeking coverage of the $18,000 surgery his son had in 2007 to remove a lump from his chest.

"I would hope that (profits) would trickle down to the loyal customers, that they represent us and keep our premiums low," he said.

Borman said the average premium increases for 2009 policies are in the "high single digits," declining to be more specific.


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  • Alexia.1 Mar 6, 2009

    Why would the lawmakers be upset? BCBS is a business like any other, except that profits go back into the company to help fund additional services. The government ought to be happy they made a profit. It means they will have money to hire people.

    What would they want? Want them to report a $185M loss and fire 20%?

  • xandradee919 Mar 6, 2009

    affirmativediversity, you stated:

    "I can go one better. Go on BCBS website and price out that same health insurance. Its probably cheaper, again!

    I've asked several times why the State Premuims or "group" premiums are so high? Who get the "sales commission"????"

    Group premiums are so high because on most of them, the members are not independently underwritten. On a self-paid policy, each member has to be underwritten for health history. The premiums go up according to your health history. So your quote could possibly be on par with what the state is charged—or even higher. On most groups, it is an aggregate of every single employee, from the healthiest, to one who may have cancer, AIDS, etc… That’s why the group premiums are higher, because they charge the group as a whole. There is no “sales commission”, not in the way you are thinking.

  • scarletindurham Mar 6, 2009

    klcmomof2 - I was agreeing with you ;)

  • klcmomof2 Mar 6, 2009

    I was actually being sarcastic. I believe business should have the right to make a profit. I am not getting a dime from BCBS - but I still believe they have the right to make a profit.

  • scarletindurham Mar 6, 2009

    Oh my goodness, a business is in business to make a profit? That is just crazy. They should give everything away - let's end capitalism now! Entitlement to everyone!
    March 6, 2009 1:27 p.m.
    Report abuse

    Yup, like I said before, the same people calling Obama a socialist turn around and bash any profitable capitalism they aren't getting a piece of. There is no satisfying the crowd here.

  • NeverSurrender Mar 6, 2009

    "So who actual owns BCBS? Who get the money that is made?"


    A friend and I tried to determine that once and found out that actually no one owns BCBSNC. There are no shares or shareholders in the company.

    So as near as we can tell based on public documents, it is a not-for-profit corporation that is fully taxed that is held in trust for the people of the State of North Carolina who are the ultimate "owners".

  • klcmomof2 Mar 6, 2009

    Oh my goodness, a business is in business to make a profit? That is just crazy. They should give everything away - let's end capitalism now! Entitlement to everyone!

  • djbyrdnc Mar 6, 2009

    So who actual owns BCBS? Who get the money that is made?

  • NeverSurrender Mar 6, 2009

    "Mark my word, no other Health Ins. Company will take on the state health plan. they were offered in past and turned it down."


    The main reason is that unlike the big national insurers like Cigna, Aetna, or United Healthcare...there is only one insurance company that has a presence/network in all 100 North Carolina counties: BCBSNC.

    One thing that Cigna et al won't tell you is how they're able to offer seemingly cheaper rates than BCBSNC...they cherry-pick the metropolitan areas and then use them as a loss-leader to take away market share and limit competition.

    I've had Cigna before...I wouldn't trust those people to insure a dead cat. Their customer service is beyond abysmal straight on to pure evil. I had good luck with United but I've heard horror stories from others. And I never made a claim under Aetna so who knows how they are.

    And yet BCBSNC is profitably holding it's own against vastly larger plans who are losing money and laying off employees! Hmmmmm.....

  • NeverSurrender Mar 6, 2009

    "What too many state workers don't seem to understand...you are not INSURED by BCBS, you are insured by the state! BCBS is just the administrator."


    Given all of the howling we've had from state employees who have been less-than-impressed with their fancy new payroll system BEACON and how it's inaccurate at best, I can only shudder at how horrific the service experience would be if the state developed a system to manage health claims by state employees.

    I'd advise the state employees to be careful what they wish for...they just might get it!

    Whilst we're handing out advice, might I kindly suggest the following:

    1. Know what your plan covers and what it doesn't...that's what the plan booklet is for. And if that doesn't adequately answer your questions, there is a toll-free number with people who can!

    2. Your claims are actually paid by the state! All BCBSNC does is enrollment, adjust claims, and send out EOBs.

    3. It's your money...keep an eye on expenses and shop around!