Tennessee’s biggest health insurer plans to use a portion of its savings from the new federal tax law to enhance its consumer tools for selecting doctors and hospitals this year and will share the rest of its savings in its premium rates next year.
But with medical costs still rising, the tax savings will likely offset only a slight portion of next year’s increase, especially in the individual market, where the end of the cost sharing payments under ObamaCare by President Trump has resulted in insurance companies raising rates to offset their higher risks.
BlueCross BlueShield of Tennessee estimates it will save about $50 million this year from the reduced corporate income tax, which was cut from a top rate of 35 percent down to 21 percent this year. Although the Chattanooga-based health insurer is a not-for-profit business, it paid $548 million in federal, state and local taxes last year since it is treated the same as its investor-owned competitors for most taxes.
“We pay all the same taxes as our competitors,” said John Giblin, BlueCross’s executive vice president and chief financial officer. “And over the past five years, we have consistently paid more in taxes than we’ve retained in net income each year.”
The drop in the federal tax rate is less than 10 percent of Blue Cross’s total tax bill, but it will help BlueCross enhance some of its health management capabilities this year, Giblin said.