Staff File Photo / The BlueCross BlueShield of Tennessee office complex features a modern architectural campus atop Cameron Hill in downtown Chattanooga.

The coronavirus pandemic and the economic upheaval it produced last year both trimmed the rolls of those insured by Tennessee's biggest health insurer and forced some costlier treatments and prevention measures.

But those extra costs were largely offset by a drop in elective surgeries and procedures during much of last year as hospitals shifted their focus and preventative measures made it harder to conduct business as usual at area hospitals and medical offices.

As a result, BlueCross BlueShield of Tennessee ended up earning $355 million in net income on just under $18.4 billion in revenues in 2020, including payments for both insurance plans and other health plans administered by the Chattanooga-based health insurer.

The net income for BlueCross in 2020 was down 28.3% from the $495 million the company earned in 2019 and would have been down much more without a court-ordered payment from the federal government for the health insurer for earlier uncompensated risks BlueCross bore when the Affordable Care Act began.

BlueCross' profit margin of 1.9% last year on revenues of more than $18 billion was the lowest in four years and below the company's 5-year average margin of 2.6% for its net income as a share of its total revenues. Most of last year's profits for the Tennessee BlueCross company came from a one-time payment of $214 million to make up for previous losses BlueCross had incurred when the so-called Obamacare program began nearly a decade ago.

But total revenues for BlueCross in 2020 were still up 1.1% from the previous year even though overall enrollment dropped around 75,000 due to the pandemic-related shutdowns and cutbacks of many jobs.

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Roy Vaughn / Staff file photo

"2020 was certainly an unusual year and through that time we focused on improving the health of our members and being there for them in particular when they needed it most," said Roy Vaughn, senior vice president and chief communications officer for BlueCross in Tennessee. "We focused on responding appropriately to the pandemic to remove barriers and the costs for the testing and treatment of COVID-19. We also took steps to streamline processes for health systems and were on the front lines to make sure we enabled as much care as we could."

BlueCross members saved $54.8 million because the company waived cost sharing for COVID-19 testing and the BlueCross Foundation provided nearly $9 million in 2020 and 2021 for a variety of relief programs, including $5 million for food banks across Tennessee that helped pay for 14 million extra meals to low-income and struggling families and $1.7 million to aid in local vaccine distributions.

"If you look at the year as a whole, COVID-related care basically was the same as the amount of elective care that was not done due to restrictions, COVID protocols or people's own reluctance to pursue some procedures," Vaughn said. "On balance, they pretty much canceled each other out."

This year, the pent-up demand for medical care is rising again, boosting health care costs above what was forecast for the 3.4 million lives covered by the plans insured or administered by BlueCross of Tennessee, Vaughn said.

To help hold costs in line, BlueCross decreased its merit pool available this year for its 6,576 employees, including 5,485 in Chattanooga, to 2.5%. Last year, the merit pool overall funded an average of 3% raises for BlueCross employees.


How your health dollar is spent



Obamacare refunds

BlueCross also expects to make refunds this fall for the third time in the past couple of years to individual and small group employers who participated in the Affordable Care Act 's health exchanges last year.

The Tennessee Department of Commerce and Insurance is still reviewing insurers' costs for 2020 under the health exchange program. BlueCross estimates it will pay about $26 million in rebates to individual members and $4 million to small employer groups. Under the Affordable Care Act, insurers are required to pay out medical claims worth at least 80% of the premiums collected and BlueCross fell slightly short of that mark, according to company estimates.

Last fall, BlueCross gave a total of $88 million in rebates to its members and the company paid another $26.5 million in rebates this spring after the Supreme Court order granting insurers higher payments for risks they undertook in the early years of Obamacare. Those payments pushed the medical loss ratio below the 80% required level and yielded the second round of rebates in eight months in May for those enrolled in health exchange programs with BlueCross in the past.

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Staff file photo / In the center of the BlueCross BlueShield of Tennessee campus in Chattanooga is a courtyard for students and employees to enjoy.


Paying taxes, building reserves

BlueCross BlueShield of Tennessee is a not-for-profit health insurer that uses its income to add to its reserves to cover its member claims. But BlueCross pays state and local taxes similar to its for-profit rivals. Last year, BlueCross paid a total of $601 million in local, state and federal taxes, or nearly twice the $355 million of net income the company earned in 2020.

BlueCross's reserves, which have built up over the company's 75-year history, have risen to $3.7 billion, or about 60% above the state-required minimum reserves for the company. The required reserves of $2.3 billion for BlueCross would cover member claims for 66 days without any new premium payments. The extra reserves above the required minimum that BlueCross has would provide another 38 days of typical coverage without additional premium payments.

"These reserves are as important as ever as we face the COVID-19 pandemic together," BlueCross said in its annual financial report for 2020. "We are a not-for-profit, which allows us to earn lower margins but also brings a responsibility to maintain strong reserves."

Contact Dave Flessner at or 423-757-6340.