Health Care Service Corp., the largest not-for-profit health insurer in the country, suffered large losses in 2014, the first year that Americans could buy individual coverage through the public exchanges.
HCSC recorded a $281.9 million loss in 2014, compared with a $684.3 million surplus in 2013—a swing of almost $1 billion. However, the losses were somewhat expected.
HCSC, the Blue Cross and Blue Shield insurer for Illinois, Montana, New Mexico, Oklahoma and Texas, said the inaugural year of the Affordable Care Act's exchanges disrupted the insurance industry, particularly the individual market. Medical claims were up significantly, reflecting the needs of a sicker membership. HCSC's prescription drug costs rose 43%.
Blue Cross and Blue Shield of Texas, for instance, lost almost $400 million on individual policies in 2014. Claims outpaced premiums by $280 million at Blue Cross and Blue Shield of Illinois.
Earlier this year, Moody's Investors Service said a majority of insurers lost money on their exchange business in 2014. The profitability of those plans “will continue to be challenged in the near future … until some degree of stability is achieved in the insured population with both regulations and the number of insurers participating,” the credit-rating agency said.
The first open-enrollment period also presented several anomalous issues that affected HCSC's finances. Technological glitches on the federal HealthCare.gov website stymied enrollment nationwide in the opening weeks and months of the federal exchange. Further, the Obama administration allowed people to stay in health plans that were not in compliance with ACA standards through 2016. Many insurers slammed that decision, saying it prodded younger, healthier members to avoid choosing the new exchange plans.
HCSC had nearly 2 million members in its retail business as of March 31. That figure includes those who bought plans both on and off the exchanges. HCSC said the nine-figure loss is likely to correct itself over the long term.
“Over time, as we have more experience on the exchanges, and that market stabilizes, we expect to see lower expenses and results that will maintain our financial strength while continuing to provide our members with cost-effective products, services and peace of mind,” a spokeswoman said in a statement.
Revenue at the Blue Cross company increased 22% in 2014, totaling $27.7 billion. HCSC also received $322.1 million in cost-sharing subsidies. Under the ACA, the federal government pays health insurers subsidies to help low-income members with their deductibles, copayments and other out-of-pocket expenses.
Cost-sharing subsidies are available to people who buy an exchange plan and make between 100% and 250% of the federal poverty level. House Republicans have sued the Obama administration, arguing that funds for the subsidies were not appropriated by Congress.
HCSC's total fully insured membership jumped to 9.7 million members, as of Dec. 31. When including self-insured plans, HCSC handles health insurance for more than 15 million people.
HCSC is the fourth-largest U.S. health insurer by membership, trailing for-profit giants UnitedHealth Group, Anthem and Aetna, according to Moody's.
