Blue Cross Blue Shield of Michigan lost $2.5 million in 2012 as deep losses on individual health insurance policies more than offset earnings across other portions of the business.
The health insurer today said it recorded a $221 million underwriting loss that came mostly on individual and Medicare supplemental health plans that represent about 9 percent of Blue Cross Blue Shield’s business.
Vice President for Finance Paul Mozak termed the overall loss as “relatively small” and indicative of the continued losses on individual policies. Unlike past years, earnings across other segments and Blue Cross subsidiaries were not enough to offset the individual losses in 2012, he said.
“It is very consistent that we’ve been losing money over time” on individual coverage, Mozak said.
The loss last year came after Blue Cross reported net income of $40 million in 2011.
The overall loss came despite growth last year in premium revenues, investment income and membership. Enrollment in Blue Cross Blue Shield health plans grew by more than 32,000 people last year to 4.44 million.
President and CEO Dan Loepp attributes the membership growth to moderating rate increases for small businesses, a growing product lineup and collaborations with doctors and hospitals to improve the cost and quality of care.
“In an atmosphere of significant change, we continue to see a positive response from customers to our efforts to provide more choices in health insurance products and more cost-competitive pricing,” Loepp said in a statement.
The $221 million underwriting loss for 2012 grew substantially from 2011’s loss of $48.8 million.
As it has in the past, Blue Cross Blue Shield attributed the loss on individual policies to the current state law that requires it to insure everyone who applies for coverage, regardless of their health status. That leaves Blue Cross Blue Shield with an individual market customer base that costs more to insure than HMOs and commercial carriers that are not required to take everyone.
Come next year, the individual insurance market “becomes a completely different market with entirely different rules,” Mozak said.
Beginning in January 2014, the federal Affordable Care Act requires all insurers and HMOs to issue a policy to any applicant seeking coverage through new health exchanges that all states must have operating. That should result in an easing of Blue Cross Blue Shield’s losses in the individual market.
“It makes sense that those losses will moderate over time and that they will be absorbed as they have not been for the last 30 or so years,” said Andy Hetzel, Blue Cross Blue Shield’s vice president of corporate communications. “New regulations coming in the individual market, the reforms that are happening and the new marketplace that is coming online should, over the long term, help to moderate the entire market loss on individual products because the risk will be spread more evenly over a number of insurers.”
Blue Cross Blue Shield of Michigan overall generated revenue of $20.9 billion in 2012 across all of its business segments that include self-funded policies that account for more than 50 percent of business and its Blue Care Network HMO and the Accident Fund worker’s compensation and LifeSure long-term care insurers. That compares with $20.4 billion in total revenue in 2011.
The insurer paid out $18.6 billion in benefits, which equates to about 89 percent of revenue.