Blue Cross Trims Obamacare Losses, Makes Larger Profit

Mar 1, 2017

The dominant insurance company in North Carolina performed far better on the Obamacare exchange last year and increased overall profits dramatically as a result.

Less than 10 percent of Blue Cross Blue Shield's customers are on the Affordable Care Act exchange. Yet that part of its business fared so poorly in 2014 and 2015 that the company as a whole either lost money or came out just about even.

Chief Financial Officer Mitch Perry says last year that changed.

"We ended the year with an improved net income of $185 million," he said on a call with reporters.

Perry said Blue Cross' Obamacare business still lost money, but it was only a fraction of previous losses ($38 million compared to $282 million the year before). The turnaround is due to the simple arithmetic of health insurance: Blue Cross charged higher premiums, so it had more money to cover the health services people needed.

Perry said the needs among Affordable Care Act customers remain high.

"Within our ACA business, our customers continue to be sicker overall and use more expensive services at a higher rate," he said.

On average, they had twice the emergency room costs of all other customers under age 65.

This year, the company's Obamacare customers are roughly doubling because other insurance companies dropped off the exchange, leaving Blue Cross as the only one in 95 percent of counties. 

If Blue Cross drops out next year, it would essentially kill North Carolina's exchange. Perry said it's too soon to make that decision. 

"But if we can prove to ourselves that it's sustainable and affordable, then we would like to be able to stay in for 2018," he said.  

Perry also talked about prescription drug costs rising rapidly across all lines of business. He said drugs now account for about 22 percent of all health care costs – roughly double what it was 15 years ago.

Even with those costs, the majority of Blue Cross' business saw gains last year. The bulk of its customers are covered through their jobs, and that market keeps making money.