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Blue Cross Blue Shield spent $860M on COVID-related claims in 2021; future costs to be factored into rates COURTESY PHOTO

Blue Cross Blue Shield spent $860M on COVID-related claims in 2021; future costs to be factored into rates

BY Tuesday, March 01, 2022 12:58pm

The high cost of medical claims tied to the COVID-19 pandemic drove Blue Cross Blue Shield of Michigan to a loss in 2021 on its core health insurance business.

The state’s largest health insurer spent more than $860 million in 2021 for COVID testing, treatment and vaccines, an amount that was not figured into rates. COVID-related costs led Blue Cross Blue Shield to record a $374 million underwriting loss for 2021.

Earnings on other non-health care businesses such as the Lansing-based AF Group, and strong investment income of $907 million, helped the corporation overall record $360 million in net income with $32.49 billion in total premium revenues. That compares to $646 million in net income with $30.1 billion in total premium revenues in 2020.

“In 2021, Blue Cross put our financial strength behind our members and customers in a time of crisis, providing $860 million in pandemic-related benefits while shielding our members from direct impacts to their premiums,” Blue Cross Blue Shield President and CEO Daniel Loepp said in a statement. “The strong performance of our subsidiaries and investments enabled us to support our members, while also managing a small positive margin to advance our business.”

The 2021 COVID-related costs included more than $600 million for treatment, $185 million for testing and $75 million to administer vaccines.

In the two years since the pandemic began, Blue Cross Blue Shield has incurred $2.1 billion in COVID-related costs that were not factored into present rates, Executive Vice President and CFO Paul Mozak said.

As Blue Cross Blue Shield, which provides health coverage to more than 5.2 million people nationwide, begins to discuss rates for 2023, and as the pandemic transitions to an endemic, related costs will now figure into the rate equation, Mokaz said in a media briefing on the 2021 financial results.

“We are all watching very carefully what is happening with the pandemic. Clearly last year the ability to forecast what would happen in the rating cycle was going to be very, very challenging, and so we chose to do the appropriate right thing and not factor in those rates. Moving forward, we think it’s likely that COVID will become more endemic and we’ll take a very hard look to make sure how we factor endemic costs that will be occurring more routinely year to year into rates, but the decisions have not been finalized,” Mozak said. “We’re sitting today in what appears to be another lull in the pandemic, and we can all hope that continues through the rest of the year and COVID doesn’t come back with another mutation that’s going to be significant to the population and health care in the state of Michigan or globally. Those are always, of course, very difficult to predict.”

Mozak declined to identify the amount that Blue Cross Blue Shield budgeted for COVID-related costs in 2022, saying that data are confidential.

In a filing to state health insurance regulators, Blue Cross Blue Shield reported that hospital and medical claims in 2021 increased 11.4 percent to $7.09 billion.

The Blues recorded $301.7 million on its Michigan health insurance business in 2021 that included $9.68 billion in total revenues, a $162.2 million underwriting loss, and a $459 million investment gain.

In reporting annual results, Blue Cross Blue Shield said Loepp earned $15.6 million in total compensation in 2021. That amount includes a $1.6 million base salary, a $12.4 million bonus, and $1.5 million in other compensation.

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