On paper, EmblemHealth swung dramatically into the black in 2016, the first full year under CEO Karen Ignagni, after nearly $600 million in losses in the previous two years.
But that turnaround was driven almost entirely by the sale of its New York City office building for $330 million. Beyond that, underwriting losses at the nonprofit's two health insurance companies, GHI and HIP, widened to $276.5 million from $128.7 million in 2015. Still, after a net loss in 2014 of $485.8 million, Ignagni said she believed the company is moving in the right direction by shifting more of its contracts toward value-based payments. "We're continuing to show progress," she told Crain's. "As we rebuild, modernization is No. 1 to achieve our consumer support and provider support goals."
The company's performance was dragged down by HIP, where losses widened by 67% to $239.2 million. HIP lost $270.6 million from its underwriting business and earned $30.4 million in gains on investments. GHI—which has revenue of about $909 million, or less than one-fifth of HIP's—lost $5.9 million from its core underwriting business, but that came after earning $20.7 million in 2015.
Ignagni, the former chief executive of America's Health Insurance Plans, the most powerful insurance lobbying group in the U.S., touted Emblem's 10.2% decline in spending on administrative expenses, which totaled $540.7 million, even in a year when the insurer invested substantially in technology. The industry is closely watching Ignagni's progress as she seeks to engineer a turnaround at Emblem and show that her skills as an operator match the policy chops that influenced the creation of the Affordable Care Act.
There is a vested public interest in Emblem's survival, as the company insures about 90% of the city's workforce.
When Ignagni arrived in September 2015, the company's technology was outdated. "To be a health plan in the 21st century, you must be agile and work in real time at internal processes," she said. Up-to-date information on members' medical spending is needed for an insurer to manage costs.
She said the sale of Emblem's Ninth Avenue building was motivated by a desire to have more of its employees under one roof at 55 Water St. in lower Manhattan, including employees of its physician group partner, AdvantageCare Physicians. All the employees at its Hell's Kitchen office are projected to move by April.
Some of Emblem's workforce didn't last long enough to move downtown. The insurer issued 250 layoff notices to employees in April and announced it would bring in TriZetto, a subsidiary of Cognizant, an IT services and outsourcing consultant in Teaneck, N.J.
That move led to some political blowback, as Florida labor attorney Sara Blackwell helped organize protests outside Emblem's Ninth Avenue office. Ignagni said the company's efforts to modernize its technology will continue through the third quarter of this year but said she will shift more of her focus to improving Emblem's customer experience and partnerships with doctors and hospitals.
"That was part of stage one, which is the modernization stage," she said of the layoffs. "Now we are transforming and rebuilding. We want to be one of strongest and most active health plans."
Ignagni's goal to transform Emblem likely will continue to be an uphill battle. The company's revenue from premiums fell 3.1% last year, and it faces fierce competition from national players with greater scale, such as Aetna, Anthem's Empire BlueCross BlueShield, Cigna and UnitedHealthcare.
The company did manage medical costs more successfully last year, unlike its startup counterpart Oscar, which lost $124.1 million from its New York business. Emblem spent 1.6% less on hospital and medical expenses, including prescription drugs, spending $5.25 billion.
