Tennessee’s biggest health insurer paid over $16.5 billion in health claims last year as claims across the state dipped from the historic high reached the year before during the pandemic.
In a new report on its 2022 results, BlueCross BlueShield of Tennessee said total claims last year were down $250 million from 2021. But with investment income down even more last year, BlueCross reported its lowest net income in years during 2022, earning less than 10% of its long-term profit trend last year.
BlueCross reported net income last year of $22 million, or 0.1% of its revenues. The Chattanooga-based health insurer had net income of $521 million in 2022 and $355 million in 2021.
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“As a mission-driven, not-for-profit company, our first priority is to improve the health of our 3.3 million members and the communities we serve,” BlueCross Vice President Dalya Qualls White said in a report on the 2022 results. “Being mission-driven means we target lower operating margins than our competitors. With these lower operating margins and intense focus on operating efficiency, we provide greater value to our members and customers in Tennessee.”
BlueCross is one of the state’s largest non-profit companies, but because it competes with investor-owned companies in the commercial insurance market, it is taxed similarly to private insurers. BlueCross paid $334 million in total taxes last year and the company’s foundation also contributed $13.4 million for a variety of community programs, including the creation of five BlueCross Healthy Places along with disaster relief and education scholarships.
HOW PREMIUMS WERE SPENT
Claims for physician services took up a larger share of total medical costs last year, rising from 27% in 2021 to 30% in 2022.
Qualls said the increased payments for physician services “was primarily driven by an increase in provider-administered drug costs, which are becoming increasingly expensive.” BlueCross is seeking to limit those drug costs through its specialty pharmacy program, Qualls said.
BlueCross said 23% of its premiums were used for inpatient hospital care and 22% of premiums paid for outpatient medical treatments and surgeries.
BlueCross said it paid out 88% of the premiums it collected to pay health care providers and spent about 9 cents of every premium dollar to process such medical claims and handle other expenses of collecting premiums, paying charges and administering its networks and cost schedules. The company’s taxes totaled about 2% of premium costs and net income comprised less than a penny of every premium dollar paid.
RISING HEALTH CARE COSTS
PwC’s Health Research Institute estimates health care costs in the United States rose an average of 5.5% last year — the lowest increase in five years. But the consultants predict health care costs will grow in 223 by 6% and rise even faster by 7% next year.
Health care spending totaled 18.3% of the U.S. gross domestic product in 2021, according to the most recent estimates by the Centers for Medicare and Medicaid Services. That’s nearly twice the share of the economy spent on health care costs in the rest of the world.
In a news release about its 2022 results, BlueCross said it is working to try to limit rising health care premiums by:
— Revamping eight Blue of Tennessee centers to help members to get care from the right providers and get help with all of their health insurance plans in one location.
— Expanding access to telehealth and behavioral health through virtual care services.
— Launched tools like AmplifyHealth for large employers to help members find the lowest-cost options for their health needs.
— Lowering the cost of drugs through a specialty pharmacy program, which saved $73 million for employer groups and members in 2022.
“Through this program, we negotiate lower prices for drugs with specialty pharmacies in our network,” Qualls said. “We still pay the provider for administering the drug and allowing the member to use the same provider.”
— Continuing provider networks that offer savings for employers by negotiating discounts from hospitals and other health care providers. In exchange for lower rates, these networks bring more patients to participating providers — and help insurers make sure providers meet safety and quality standards, Qualls said.
BlueCross said it negotiated new contracts — and in some cases, ended contracts in 2022 — with providers who are paid much more than their peers or were requesting significant rate increases.
Qualls said BlueCross is able to earn lower margins than investor-owned insurers, but without shareholders and investors, it also needs to maintain strong reserves to handle unexpected emergencies and health crises as demonstrated by the challenges during the pandemic.
Over its 78-year history, BlueCross of Tennessee has plowed its earnings each year into its reserves to grow its total investments and reserves to $4.1 billion at the end of last year, which is $1.5 billion above the statutory minimum required level of $2.6 billion. The extra reserves could cover all member claims for around 113 days in the event of an emergency.
“We believe it’s critical to hold those additional reserves — and this is even more important during times of market volatility and economic uncertainty,” Qualls said.
The financial rating service Standard and Poor’s gives BlueCross of Tennessee an A plus rating.
— Compiled by Dave Flessner