North Carolina Blue Cross Reports First ACA Profit
March 02--Blue Cross and Blue Shield, the state's largest health insurer, reported its first profit ever on the Affordable Care Act, netting about $600 million last year on customers the company covers under the federal health care law.
Blue Cross reported its financials Thursday and said its ACA profit helped drive a company-wide net income of $734 million last year. In addition to the half-million people Blue Cross covers under the ACA, the company provides insurance through large and small employers and also administers North Carolina's State Health Plan, for a customer total of 3.8 million people.
Despite three years of consecutive losses on ACA plans, the Blue Cross ACA business is now in the black by $118 million because of the profit generated this year.
"This is a clear sign that the ACA can and does work," said Brendan Riley, health policy analyst at the N.C. Justice Center in Raleigh. "Clearly things are stabilizing despite all the sabotage and politics in Washington."
Blue Cross chief financial officer Mitch Perry said in a conference call that 2017 exceeded its expectations but should be seen in a broader context of ACA losses in recent years and continued uncertainty. Because Blue Cross is one of two ACA insurers in the state, and the only one that provides coverage in all 100 counties, the company's financial performance is a barometer of the ACA's prospects in North Carolina.
The Durham company is one of the region's largest employers, with a workforce of 4,700, and said its annual revenue increased to $9.4 billion last year from $7.8 billion in 2016. Revenue from ACA customers alone doubled to $3.7 billion from $1.8 billion, as ACA rates increased 24.3 percent and Blue Cross gained about 200,000 ACA customers.
This year Blue Cross customers who buy individual insurance from the company will pay an average 14.1 percent more. The rate increase, which went into effect Jan. 1, was approved last fall by the N.C. Department of Insurance for coverage purchased under the ACA. Across the state Blue Cross customers will see 2018 rates change from a decrease of 0.6 percent to an increase of 23.4 percent.
About 50,000 Blue Cross customers, however, saw their costs double or triple because they had "grandfathered" plans purchased before 2010. Those plans were less comprehensive and less expensive than ACA plans, and Blue Cross eliminated them at the end of last year.
Pay for two CEOs
The company also reported that its new CEO, Patrick Conway, was paid $235,846 in the final three months of 2017. Conway, who started with Blue Cross on Oct. 2, also received $800,804 in signing bonuses and other compensation, for a total package worth just over $1 million.
The previous CEO, Brad Wilson, was paid more than $4.2 million, including a salary of nearly $1.2 million and more than $3 million in bonuses and other compensation. The top 10 executives at the nonprofit organization were all paid more than $1 million in 2017 in total compensation. And Blue Cross's 13 board members were paid between $31,000 and $171,668 for their service.
Blue Cross provides individual insurance to 538,000 North Carolinians through the federal exchange created by the ACA. The 2010 law requires insurers to provide certain basic benefits and requires, until the end of this year, most Americans to get health insurance or pay a fine.
Perry said Blue Cross's ACA customers continue to be sicker and costlier than average, costing the company $640 a month, compared with the $450 a month it costs to pay for medical claims of non-ACA customers.
The most expensive 5 percent of ACA customers generated $267 million in revenue for the company last year and cost $2.1 billion in medical claims, nearly a third of all medical claims paid out last year.
Companywide, Blue Cross's medical costs for all customers were $6.6 billion, up from $5.8 billion.
John Murawski: 919-829-8932, @johnmurawski
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