Priority Health posted strong earnings and membership growth in 2015 for both its commercial and Medicaid health plans.
The Grand Rapids-based Priority Health recorded net income of $91.1 million for 2015 on its commercial health plans, essentially equaling 2014 net income of $91.3 million, according to an annual financial report filed with the Michigan Department of Insurance and Financial Services. The 2015 result came on total revenues of $2.18 billion, a net underwriting gain of $57.8 million on health policies, and a $28.2 million net investment gain.
Chief Financial Officer Mary Anne Jones called 2015 “another really strong year” with a balance of strong membership growth and sustainable financial performance that’s gone “right as planned.”
“Over the last two years, we’ve been seeing a nice, steady level of growth and financial performance,” Jones said. “We’re anticipating that the future should continue to deliver those results.”
Membership for Priority Health’s HMO, point-of-service, Medicare Advantage and Medigap policies increased during the year to 411,670 as of Dec. 31, an increase of more than 13 percent from a year earlier.
Priority Health’s Medicaid business, Priority Health Choice Inc., made $15.1 million in 2015 on total revenues of $452.0 million, according to its annual financial report filed with the state. The Medicaid plan grew membership by 15 percent during 2015 to 115,522.
The 2015 results for Priority Health Choice include a $9.3 million transfer from a medical claims reserve fund, and compares with net income of $203,386 on total revenues of $341.0 million a year ago.
Priority Health Choice anticipated pent-up demand from clients after the state expanded Medicaid eligibility in April 2014 under the federal Affordable Care Act, Jones said. When demand came in lower than expected, the health plan during 2015 released some of the reserve funds from the prior year, she said.
When combined with fully-insured health policies, Priority Health’s overall membership ended 2015 at 660,575 and has since grown to more than 715,000 as of March, Jones said.
As Priority Health maintained the bottom line in 2015, chief rival Blue Cross Blue Shield of Michigan recorded a “modest” $68 million loss for 2015 that’s attributed to one-time charges to settle litigation and from losses in its heavily-subsidized Medigap supplemental policies for Medicare recipients.
Minus the costs of approximately $200 million for the Medigap subsidies and $300 million to settle the litigation, Blue Cross Blue Shield would have finished 2015 above the break-even mark, said Vice President of Finance Paul Mozak.
“We worked diligently as a nonprofit mutual to manage our financial performance in 2015,” Mozak said. “While we always seek reasonable, positive margins, it’s not uncommon that events can happen during the course of the year to turn margins negative, and that’s what occurred in 2015.”
The $68 million net loss for 2015 includes all of Blue Cross Blue Shield’s nonprofit and for-profit subsidiaries and came on total revenues of $24.2 billion. The bottom line translates to a negative margin of about 0.3 percent, Mozak said. Subsidies for Medigap policies will end in 2016, he added.
Blue Cross Blue Shield’s overall annual results for 2015 compare with 2014 net income of $272 million on total revenues of $23.1 billion for a 1.2 percent margin.
The loss in Blue Cross Blue Shield’s health insurance business alone was far deeper, $344.2 million on revenues of $7.5 billion, with a $572.9 million underwriting loss on health policies and a $206.7 million gain on investments. That compares with 2014 net income of $295.0 million on $7.44 billion in revenues, a $97.5 million underwriting gain, and $208.3 million in investment income.
2015 was the first time that Blue Cross Blue Shield did not lose money on individual health policies, Mozak said. Blue Cross Blue Shield in past years has recorded losses in the individual market in excess of $100 million.
“We have the right products at the right price, and we’ve been successful in the individual market for 2015,” Mozak said.
The turnaround came amid what Blue Cross Blue Shield spokesman Andy Hetzel calls an “extremely volatile” individual market that continues to mature. Despite the volatility, “we remain committed to the individual market for the long term,” Hetzel said.
The company’s HMO subsidiary, Blue Care Network, recorded net income of $18.0 million on total revenues of $32.5 billion, and a net underwriting loss of $1.8 million and net investment income of $26.7 million.
The state’s largest health insurer added nearly 45,000 members during 2015 to grow membership to 4.53 million, including Blue Care Network.