Medindia

X

Blue Cross Blue Shield of Michigan Reports 2007 Consolidated Financial Results; Consolidated Earnings Are Down $58 Million Compared to 2006; Losses on Individual Insurance Lines Total $245 Million

Saturday, March 1, 2008 General News J E 4
Advertisement
DETROIT, Feb. 29 Blue Cross Blue Shield of Michiganreported today its consolidated net earnings for 2007 decreased by $58 millionon a GAAP basis -- to a total of $152.2 million -- marking the third straightyear of lower earnings for the nonprofit company.

BCBSM lost $307.2 million on health insurance underwriting in 2007 at theparent company and its HMO subsidiary, Blue Care Network, including $245million in its individual lines of business. The company's underwriting margin-- a negative 1.6 percent in 2007 -- has averaged less than one-tenth of onepercent (0.1 percent) since 1990. Contributions from BCBSM's investmentportfolio and its for-profit subsidiary companies offset underwriting losses,leading to consolidated net earnings of $152.2 million. The consolidated netearnings were down from the $210.2 million reported in 2006.

"Our financial results confirm that Blue Cross is succeeding in managingits performance consistent with our values as a nonprofit corporation," saidDaniel J. Loepp, BCBSM president and CEO. "Our subsidiaries and investmentsare delivering the income necessary to keep us operating in the black, at verylow or negative margins, while keeping the pressure off health insurancepremiums."

BCBSM reserves as measured by Risk Based Capital (RBC) -- a nationallyrecognized calculation of the adequacy of reserve capital for a company's riskexposure -- declined for the third straight year:

The company continues to manage its reserves within the mid-range for RBC.BCBSM's reserves fall between the state-imposed maximum of 1000 percent RBCand the absolute minimum capital requirement of 375 percent RBC that the BlueCross and Blue Shield Association requires of its member plans.

"Every month, Blue Cross pays nearly $1.5 billion in medical and pharmacyclaims, and we put more money back into Michigan health care than any othercompany," Loepp said. "The medical care we cover churns significant revenueback into health care providers locally -- sustaining jobs and helping peopleaccess quality care. Our level of claims payouts also requires reserves toensure that we are adequately capitalized for risk exposure so thatsubscribers, customers and providers are protected."

BCBSM's business model is for its enterprise companies -- Lansing-basedAccident Fund Insurance Company of America, Southfield-based DenteMax andBrighton-based LifeSecure -- to deliver revenue that the company doesn't haveto generate from health insurance premiums. The combination of subsidiaryrevenue and investment income strengthens the company financially and allowsit to add to reserves to keep pace with the increasing cost of health care andother factors that increase risk for the nonprofit parent company. The Bluesreported GAAP net income of $98.2 million for Accident Fund and $200,000 forDenteMax in 2007.

"This is the third consecutive year that Blue Cross has reported lowerconsolidated earnings," said Mark Bartlett, BCBSM executive vice president andCFO. "Our for-profit subsidiaries play an important role because theycontributed earnings of nearly $100 million in 2007, which helped reducepressure on health care premiums."

Losses in the Blues' individual products grew in 2007, totaling $245million. The losses were caused by premiums that continue to fall below actualmedical costs for those covered. The $245 million in losses directly impactsthe level of Blues reserves.

The company's total consolidated revenue in 2007 was $19.4 billion(premiums and premium equivalents that include both fully-insured and self-funded business), compared to $16.3 billion in 2006. Part of the growth inrevenue is attributable to growth in the Medicare Advantage and Medicare PartD products that were introduced in 2005, which accounted for $2 billion inrevenue in 2007, an increase of $1.4 billion.

Blue Cross Blue Shield of Michigan, a nonp
Advertisement


Advertisement

You May Also Like

Advertisement
View All

Post your Comments

Comments should be on the topic and should not be abusive. The editorial team reserves the right to review and moderate the comments posted on the site.
User Avatar
* Your comment can be maximum of 2500 characters
I agree to the terms and conditions
s
Orchid Cellmark to Announce Fourth Quarter and Ful...
S
Don't Balance the Budget at the Expense of People ...