BlueCross Turns Small Profit Despite Bigger Obamacare Losses

Feb 26, 2016

North Carolina’s dominant insurance company had even deeper losses on the Obamacare exchange last year. But BlueCross BlueShield’s overall business ended 2015 in better shape financially than the year before.

BlueCross, like a lot of other big insurance companies, is figuring out how to muddle through while a small part of its business bleeds a large amount of money.

Less than 10 percent of its customers buy insurance on the Obamacare exchange or directly from BlueCross. But losses related to that more than doubled last year to $282 million.

"While our Affordable Care Act or ACA business lost more than last year," Chief Financial Officer Gerald Petkau said, "BlueCross and BlueShield of North Carolina ended 2015 with an improved net income of half a million dollars, largely due to better results in other lines of business and investment income."

Most people get insurance through their employer, and that part of BlueCross’ business grew slightly last year. BlueCross also offers Medicare Advantage plans (essentially private insurance on the government’s dime) and that business improved considerably.

Georgetown University researcher Sabrina Corlette says nationwide, the employer and government parts of the business tend to be the most reliable for insurance companies.

"Where there’s this lack of stability and uncertainty is in the Obamacare markets," she says. "But that’s not unexpected. A new market is going to take some time to settle down and stabilize."

That’ll happen when companies get closer to a sweet spot with premiums, where they’re high enough to cover the cost of people’s care, but low enough to attract customers.

Petkau, BlueCross’ CFO, says the company raised average premiums 33 percent on the exchange this year. 

"We’re optimistic that that’ll help us turn this around," he said. "But really there’s a lot of uncertainty. We’ve just started the year. So we really have little clarity about what 2016 will look like."

Petkau emphasized that BlueCross is doing everything it can to stay on the Obamacare exchange. But he says the company will reassess late this summer whether that still makes business sense.