Blue Cross’ surplus falls 34.5% in ’07
Posted on Tuesday, March 25, 2008
Arkansas Blue Cross and Blue Shield, the largest health insurer in the state, said its surplus revenue fell 34. 5 percent last year, to $ 28. 3 million from $ 43. 2 million in 2006.
Officials at the insurer say surplus, a nonprofit organization’s equivalent of profit, dropped last year because of efforts to keep insurance affordable.
“Premiums increased at an average of 3. 6 percent, but the cost of claims increased a lot more than that,” spokesman Max Heuer said.
Continuing to drive rising claims expenses were increasing use of new technologies — “your free-standing ambulatory surgery centers that people go to frequently, your cost of prescription drugs,” Heuer said.
Of ambulatory centers, she said, “Anytime there’s an increase in the availability of services, people are going to utilize them.”
Trends in 2007 included a move of members from “fully insured plans,” which companies and individuals pay to be a part of but for which Blue Cross assumes the risk, to self-insured plans, ones that companies themselves fund but hire Blue Cross to administrate.
The company’s fully insured membership fell 2. 7 percent to 413, 480 from 425, 159 the year earlier, according to an annual statement with the Arkansas Insurance Department.
Blue Cross’ market share fell to 36. 5 percent in 2006, the most recent numbers available, from 40. 6 percent in 2005, for total accident and health insurance premiums written in the state, the insurance department said.
Market share for the company’s closest competitor, UnitedHealthcare Insurance Co., rose to 9. 7 percent, from 8. 6 percent in 2005.
Heuer said customers were shifting from the company’s fullyinsured products to self-insured plans and to an HMO product, HMO partners, that Blue Cross owns with Baptist Health and physicians in central Arkansas.
Including people covered by the HMO and self-insured companies, enrollment grew 13. 9 percent, from 803, 945 in 2006 to 915, 472 last year.
Glen Mays, an associate professor at the University of Arkansas for Medical Sciences in Little Rock, said a shift to self-insured plans isn’t necessarily a bad or good thing for patients. It depends on the benefits for each plan.
Using a self-insured plan means that employers aren’t subject to some health insurance mandates, such as one in Arkansas that requires insurers to cover colorectal cancer screenings, Mays said, but many such plans voluntarily offer the mandated services.
In 2007, Blue Cross’ net worth, the difference between its assets and liabilities, grew to $ 511. 3 million, up from $ 495 million in 2006.
“If you look at our membership and you look at that number, that $ 511 million basically represents 6. 25 months in reserve that we would be able to pay for health care for our [fully-insured ] members should something happen,” Heuer said.
The company saw net investment gains of $ 30. 7 million for the year.
Also last year, Heuer said, Blue Cross began offering more tools to providers and consumers to support “consumer-directed” health care. Consumer-directed care typically shifts more responsibility from employers to consumers for administration or payment of health care.
One example cited by Heuer is the Blue Cross Web site, which allows consumers to enter elements such as cost or benefits that are important to them. The site then matches the consumer with an appropriate Blue Cross product.
Operating margin at the nonprofit insurer for 2007 was 2. 8 percent, down from 4. 5 percent in 2006 and 5. 7 percent in 2005. That margin is Blue Cross’ surplus revenue as a percentage of its total revenue. Total revenue increased to $ 996 million from $ 954 million.
Revenue from premiums increased to $ 981. 8 million, from $ 961. 9 million in 2006.
Blue Cross in January announced successors to its chief executive officer and chief operating officer. P. Mark White is Blue Cross’ chief executive officer-elect and Michael W. Brown is chief operating officer-elect. Brown and White are scheduled to assume their new roles on Jan. 1, 2009.
Sharon Allen retired as Blue Cross’ president and chief operating officer earlier this year but remains a Blue Cross consultant. Robert L. Shoptaw, the firm’s chief executive, is scheduled to retire at the end of the year.
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