By the numbers
$59.4 million - Net gain for 2008
$29 million - Investment loss last year
$16.5 billion - total claim dollars paid out
59.5 million - Number of claims paid
3 million - Number of Tennesseans served
Source: BlueCross BlueShield of Tennessee
Investment losses bled $29 million from Tennessee's biggest health insurer in 2008, cutting the profits for BlueCross BlueShield of Tennessee to the lowest level since 2001.
But according to company filings with state insurance regulators, BlueCross' top brass took home bigger paychecks in 2008.
Last year's bonuses and pay raises reflect the near-record year for profits at BlueCross in 2007. After boosting BlueCross statutory reserves above $1.2 billion at the end of 2007 - $443 million above the state-required minimum - the pay for BlueCross CEO Vicky Gregg rose nearly 40 percent last year to more than $2.1 million.
Other BlueCross executives got smaller, double-digit increases in pay, according to filings with the Tennessee Department of Commerce and Insurance.
BlueCross spokeswoman Mary Thompson said executive compensation at the Tennessee BlueCross plan is set by outside directors based upon comparisons with other health insurance companies.
"It is critical to our state - and Chattanooga - that BlueCross performs well," Ms. Thompson said. "BlueCross has compensation levels that are in line with the national average."
Chattanoogan Lamar Partridge, chairman of the 16-member BlueCross board, praised Ms. Gregg's leadership of BlueCross, which is Chattanooga's biggest private employer and the medical insurer for nearly one of every two Tennesseans.
"During her six years at the helm, Vicky has assembled a talented and high -performing senior leadership team, which has doubled revenues and market share," Mr. Patridge said. "These are accomplishments which have made BlueCross financially strong and positioned it to serve the long-term needs of our customers."
But like other insurance companies, BlueCross fiscal health was hurt by the drop in stock and real estate markets last year. The Chattanooga-based firm made more than $101.5 million on its investments in 2007, helping to boost BlueCross profits in 2007 to $172.8 million. But last year, BlueCross ended up losing $29 million on its investments, lowering the company's net income in 2008 to $59.4 million.
"Investment losses have hurt all insurance companies and really accounted for most of the drop in income for BlueCross of Tennessee last year," said Jane Dubose, director of health plan analysis for HealthLeaders-InterStudy, an industry analysis firm. "Net income is down for practically all plans last year."
Nonetheless, BlueCross managed to hold down the rate of increase in medical charges last year. Changes in company plans, including higher deductibles and premiums for members, helped reduce the average rate renewal increase after adjustments in 2008 to 6.3 percent, compared with a 7.3 percent increase in 2007 and an 8.1 percent increase in 2006.
"In 2009, BlueCross and other insurers are likely to do better with their investment income," Ms. Dubose said. "But unfortunately, there is also a lot of cost pressure from hospitals and other providers who are being hurt by the rise in uncompensated care."