Tennessee's biggest health insurer made less money last year due to cutbacks in the economy, TennCare and Medicare contracts, according to state insurance filings.
BlueCross BlueShield of Tennessee earned a net profit of $21.6 million in 2009, down almost 64 percent from the $59.4 million it made in the previous year and only one-eighth as much as what it earned two years ago.
Net income for the Chattanooga-based insurance giant was the lowest in a decade last year.
PDF: 2009 BlueCross results
"Last year was a difficult one, and we saw the recession impact our accounts," BlueCross spokeswoman Mary Thompson said. "Layoffs, closing and downsizing measures negatively impacted our customers as well as our own enrollment and sales."
But the nonprofit insurer still added to its capital and surplus accounts last year, swelling those reserves above $1.1 billion, or $292.5 million above the required statutory reserves, according to the company's financial statement filed with the state Department of Commerce and Insurance.
As a nonprofit plan, BlueCross earnings are put back into company operations or reserves. BlueCross invested nearly $300 million in the corporate campus opened last year atop Cameron Hill in downtown Chattanooga.
The company's net income last year also was used to pay $136.5 million in taxes and $7.5 million in contributions to its Tennessee Health Foundation and BlueCross Community Trust.
Company officials said net income for the BlueCross Tennessee plan was equal to only 0.45 cents of each premium dollar paid during 2009, down from 1.7 cents the previous year.
sick economy challenges plans
Don Mooradian, an insurance market analyst for Tennessee at HealthLeaders Interstudy in Nashville, said health insurers were hurt last year by the swine flu and the sick economy, among other challenges. The H1N1 flu virus pushed up health claims even as other health care costs continued to rise, he said.
The recession hurt health insurers by cutting enrollment and raising utilization, Mr. Mooradian said.
"When people are facing the prospect of layoffs, they tend to go to the doctor more often and take care of other health concerns while they know they are still covered," he said.
Those who are laid off can continue coverage by buying COBRA coverage, named for the health benefit provision approved by Congress in 1986 with the Consolidated Omnibus Budget Reconciliation Act. Typically, healthy workers who lose their jobs don't buy such coverage, but those with health problems do.
Such adverse selection hurts insurance companies, which must continue to provide coverage for such workers at their former employer's rates for up to 18 months.
Despite the drop in net income for the Tennessee BlueCross plan in 2009, other major health insurers reported higher profits in 2009.
Cigna Corp., which operates a major claims processing center in Chattanooga and is Tennessee's third-largest health insurer, boosted its net income by 16 percent in 2009 despite a 5.5 percent drop in membership nationwide. But most of Cigna's gain came from its reinsurance and other non-health care businesses.
United HealthGroup, the nation's biggest for-profit health insurer, boosted its nationwide net income last year by 35 percent to $3.8 billion. Humana's net income nationwide increased 61 percent, to $1 billion.
But Aetna Inc., the state's fifth-largest health insurer, posted a 57 percent drop in nationwide net income on investment losses and charges last year.
blues business challenge
Biggest health insurers in Tennessee in 20091. BlueCross BlueShield of Tennessee, 38.5 percent2. UnitedHealth Group, 22.1 percent3. Cigna, 14.6 percent4. Humana, 5.2 percent5. Aetna, 5.1 percentSource: HealthLeaders-InterStudyBY THE NUMBERS* $21.6 million -- Net profit for BlueCross BlueShield of Tennessee* $11.5 billion -- Total claims paid* 3 million -- Members served by BlueCross of Tennessee* $1.7 million -- Salary paid by BlueCross of Tennessee to CEO Vicky Gregg, not counting compensation to Mrs. Gregg from other affiliate companiesNote: All numbers are from 2009Source: BlueCross BlueShield of Tennessee, Tennessee Department of Commerce and Insurance
Tennessee BlueCross' total claims paid in 2009 -- $11.5 billion -- were down in 2009 due to cutbacks by some of its employer groups and the ending of its contract for Medicare coverage. The Tennessee BlueCross plan, which handled Medicare claims in Tennessee for 43 years, lost that contract last July to the Alabama BlueCross plan.
Despite such cutbacks, however, Ms. Thompson said BlueCross kept most of its commercial accounts.
"Even through the challenges of the economic downturn, we remained a valuable partner to our accounts, retaining nearly 96 percent of our customers," she said.
BlueCross also expanded its at-risk TennCare plans in East and West Tennessee in late 2008. Last year was the first full year since 2002 in which the managed care organizations in Tennessee's Medicaid plan were at risk for how they managed care.
BlueCross' TennCare plan, known as BlueCare and operated by the BlueCross subsidiary Volunteer Health State Plan, reported a loss of $95.6 million, or $64.4 million after taxes.
"The losses for BlueCare were more than expected, but it's typical for managed care organizations put at risk to lose some money in their first year," said Scott Pierce, chief financial officer for the Bureau of TennCare in Nashville. "I would expect all of the MCOs (managed care organizations) to do better in 2010."
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