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Aerial photo of BlueCross BlueShield of Tennessee headquarters in Chattanooga.
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BlueCross BlueShield of Tennessee premium spending


• Angela Braly, CEO of Wellpoint, was paid nearly $20.6 million last year, up nearly 55 percent from the $13.3 million she was paid in 2011.

• Stephen Hemsely, CEO of UnitedHealth, was paid $13.9 million last year, up 3.7 percent from 2011.

• Mark Bertolini, CEO of Aetna, was paid $13.3 million last year, up 25.9 percent from 2011

• Michael Neirdorff, CEO of Centene, was paid nearly $8.5 million last year, down from 19 percent from the previous year.

• Michael McCallister, CEO of Humana, was paid $8.4 million last year, up 15 percent from 2011

• Retiring BlueCross BlueShield of Tennessee CEO Vicky Gregg was paid $5.1 million last year, down 24.2 percent from the $6.8 million she was paid in 2011

Source: Company proxy statements


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Health insurance plan profits

Tennessee's biggest health insurer helped ensure its own fiscal health last year by boosting net income by more than 26 percent and swelling its reserves to more than 50 percent above what is legally required.

BlueCross BlueShield of Tennessee, the state's biggest nonprofit corporation with $5.6 billion in annual revenues, said Monday it earned record profits of $221.5 million during 2012.

Even with its income gain last year, BlueCross officials said the 4 percent profit margin was still the lowest among the major health insurers operating in Tennessee.

"As a tax-paying, not-for-profit company we can operate on a lower profit margin than the investor-owned companies in our industry, but we still try to maintain a small profit margin to ensure we can continue to serve our customers and remain financially strong," BlueCross Vice President Roy Vaughn said. "I think our customers want us to be strong financially and to do well so that they know they can depend upon our services."

The Tennessee BlueCross plan enjoys a top AAA bond rating by Standard & Poor's ratings service and is one of the best capitalized of the BlueCross plans. The Chattanooga-based health insurer plows its earnings back into the company and, even with its surplus reserves, still has only enough surplus money to pay all of its bills for 78 days, according to company reports released Monday. BlueCross' $1.7 billion cash reserves, excluding more than $200 million of other holdings, is $613 million above the minimum required capital by state insurance regulators.

BlueCross may have to rebate a small portion of those reserves from last year's earnings to compensate for charging too much to some of its small business customers.

According to the company's preliminary estimates, BlueCross didn't quite meet the 80 percent pay out ratio among small business clients. Under ObamaCare, health insurers must pay at least 80 percent of their premium income to hospitals, physicians and other healthcare providers for medical care among those buying individual or small business insurance. Insurers must pay at least 85 percent of premium income for health care services for large companies.

BlueCross and other health insurers typically spend 10 to 20 percent of each premium dollar on handling claims, paying taxes, selling and administering policies and maintaining reserves for potential catastrophic illnesses or disasters. BlueCross estimates it paid out 79.6 percent of its premium income in the small business category for health care during 2012, or about $3.4 million less than the required minimum.

As a result, the health insurer estimates it will pay an average refund of $232 for about 15,000 small group policy holders, although the amount for each could vary widely.

Last year, BlueCross paid refunds of more than $8 million because of the medical payment requirements of ObamaCare.

BlueCross was within the allowable medical loss ratio during 2012 for both individual policies and large group policies. Overall, BlueCross also cut its total operating costs last year by 4 percent to $1.16 billion.

Consumer advocates said Monday they hope BlueCross uses its financial strength to ensure that the transition to most of the ObamaCare insurance options goes smoothly next year.

"It's good that we have a strong insurance leader in our state that is locally owned and controlled, but I do wish BlueCross didn't have so much dominance and there was more competition in the state," said Gordon Bonnyman, executive director for the Tennessee Justice Center. "With the kind of dominance BlueCross has gained from the public and public policies over time, I would hope BlueCross will help implement the Affordable Care Act in a way that benefits the public as much as possible. With great power comes great responsibility."

At the end of last year, Vicky Gregg retired after nine years as CEO of BlueCross in Tennessee. In her final year, she was paid $5.1 million, or nearly one fourth less than her record high $6.8 million compensation package in 2011.

Gregg was succeeded as CEO this year by Bill Gracey, who was paid $1.7 million last year as chief operating officer or BlueCross.