GRAND RAPIDS — Priority Health nearly tripled earnings in 2022, although how that may affect upcoming rate proposals for next year is unclear for now.
The Grand Raids-based health plan recorded $209.9 million in net income for the year across all product lines. The results included $59.4 million in operating income on $6.21 billion in premium revenue from the sale of health policies. Investments that mostly came through dividends from subsidiaries generated $150.8 million.
By comparison, Priority Health recorded $76.4 million in net income for 2021 on $5.8 billion in revenue. The 2021 bottom line included $33.4 million in operating income and $43 million on investments.
Chief Financial Officer Nick Gates called the 2022 financial results “really a great accomplishment when looking at how the industry has performed, particularly other Michigan health plans.”
By comparison, the much larger Blue Cross Blue Shield of Michigan recently posted a $777 million net loss on $32.8 billion in revenue in 2022 because of rising operating costs, investment losses and ongoing COVID-19 response, Crain’s Detroit Business reported. The loss came after the Blues reported net income of $360 million on $32.5 billion in revenue in 2021.
Priority Health’s growth came as the health plan managed high medical claims trends from the pandemic and the rising costs for prescription drugs, especially for costly gene and cell therapies.
“For 2023, we’re optimistic that we are well-positioned for growth,” Gates said. “We have a very strong balance sheet.”
How the 2022 results will affect rate plans for 2024 is “too early to tell,” Gates said. Rate filings for next year are due to state regulators this spring.
Priority Health intends to factor the costs of the pandemic into its 2024 rate proposals, as it and other insurers did for the first time a year ago for 2023.
The health plan last year spent $267 million to test and treat members who were sickened by the virus and for administering vaccines, Gates said. Of that amount, $250 million went to medical claims for treating members with COVID, he said.
“We have our teams focused on lowering the cost of care to minimize premium increases, and we’ll know about what those will look like in the summer,” Gates said.
Likewise, Blue Cross Blue Shield of Michigan will fix COVID costs into 2024 rate proposals. The state’s largest health insurer last year paid $739 million in COVID-related medical claims.
In a media call last week to discuss Blue Cross Blue Shield’s 2022 financial results, Vice President of Enterprise Finance and Chief Risk Officer Joe Radtka said the costs to test and treat members with COVID and administer vaccines is now a regular fixture in setting rates.
“For 2024, COVID is now part of, I would describe it, our general baseline trend within our core costs of providing (service) to our customers. I would expect that to continue as we move forward to just be part of the traditional aspects of the business and providing services to our customers to cover COVID-related costs,” Radtka said.
Priority Health and most health insurers for 2023 received approval from state regulators for rate increases that were above the trends of recent years, partly because they’re including pandemic-related costs that they had absorbed in 2020 and 2021.
Rates for Priority Health’s individual HMO policies increased a statewide average of 6.7 percent and 7.6 percent for small group plans. PPO plans increased 7.6-percent on average statewide.
Among specific product lines, Priority Health’s 706,000-member HMO that accounts for three-quarters of revenue recorded $111.9 million in net income for 2022 on $4.69 billion in total revenue, according to an annual financial report to the Michigan Department of Insurance and Financial Services. The HMO had a slight $417,883 underwriting gain on health policies and $111.5 million in net investment income.
Priority Health’s 266,000-member Medicaid HMO, Priority Health Choice Inc., made $65.8 million on $1.16 billion in total revenue.
Priority Health Insurance Co., which sells fully-insured health policies, recorded $1.8 million in net income on $361.6 million in revenues. The results included a $717,672 operating loss on health policies that was more than offset by $2.8 million in net investment income, minus $287,554 in federal taxes, according to a financial report that Priority Health provided to MiBiz.
Two Detroit-based Medicaid HMOs that Priority Health acquired in 2020, Total Health Care Inc. and Total Health Care USA Inc., last year earned $28.6 million and $1.7 million, respectively.
CORRECTION: A previous version of this story incorrectly stated Priority Health’s 2021 revenues, which totaled $5.8 billion.