Right place, wrong time: BCBS insurers report Medicare gains

Blue Cross Blue Shield insurance companies have finally emerged as significant players in the Medicare Advantage market after years of struggling to make their mark. But financial pressures could drive them to depart the sector as quickly as they arrived.  

Rising medical expenses, unfavorable changes to federal policies and declining federal reimbursement dogged the Medicare Advantage industry in 2024, leading companies such as CVS Health’s Aetna and Humana to cut back where they sold policies. In some areas, Blue Cross plans were the only option left for consumers. 

Related: Medicare Advantage enrollment 2025: Winners and losers

In this anticompetitive market, Blue Cross licensees such as Elevance Health, Blue Cross Blue Shield of Michigan and Excellus Health shined. Cigna also gained members. This month, the company intends to close its $3.3 billion Medicare Advantage sale to Health Care Service Corp., which manages Blue Cross plans in Illinois, Montana, New Mexico, Oklahoma and Texas. 

“In a high-cost environment, you would think you would not want to be growing severely over what the market is growing,” said Ryan Langston, director and senior analyst of healthcare research at investment bank TD Securities. 

Elevance Health, for instance, added 35,000 more Medicare Advantage enrollees than targeted during the annual enrollment period. The for-profit company, which manages Blue Cross plans in 14 states, did not respond to an interview request. 

The company continues to suppress marketing by refusing to pay brokers commissions for selling some Medicare Advantage policies, Chief Financial Officer Mark Kaye told investors at the Barclays 27th Annual Global Healthcare Conference on March 11. This month, Elevance also lost a state contract that will reduce its enrollment by 30,000, Kaye said. The insurer wants to end the year with no more than 2.25 million members. 

“We feel good about our position in Medicare having seen a couple of months of results,” Kaye said. 

Elevance reported Medicare Advantage costs and utilization were within its projections in 2024, a noteworthy contrast to what rivals such as Blue Cross Blue Shield of Michigan and Regence BlueCross BlueShield disclosed about unanticipated increases that dinged their finances. 

Blue Cross of Michigan, for instance, reported an operating loss of $1.7 billion last year compared with $100 million in operating income in 2023. The nonprofit insurer anticipates member medical costs will outpace premium revenue by $432 million in 2025. 

To constrain expenses, the company prioritized investments in its traditional Medicare Advantage plans over those designed for individuals dually eligible for Medicaid and Medicare, said Krischa Winright, president of Medicare Advantage. Still, national competitors exiting rural counties and adding deductibles to medical and pharmacy benefits drove growth at Blue Cross of Michigan toward the high end of expectations, she said. 

“The special needs plan market is continuing to expand. But we have not put our emphasis on growing that population in 2025 simply because we were doubling down on our being able to serve the traditional Medicare Advantage market during this time of volatility,” Winright said. 

Blue Cross of Michigan's strategy is just the opposite of how most insurers have approached Medicare Advantage this year.

Rather than making cutbacks, many companies are following the money, expanding where they sell Dual Special Needs Plan policies and maintaining generous supplemental benefits. D-SNPs generate an average pre-tax margin of 7.5%, compared with traditional Medicare Advantage margins of 3.6%, according to a June 2024 report by the Medicare Payment Advisory Commission. The group makes policy recommendations to Congress. 

At VNS Health Health Plans, inking agreements with providers that serve a specific ethnicity, employing a multilingual sales team and marketing at community events and food pantries drove D-SNP sign-ups higher than expected, said David Robinson, vice president of sales and partnership development. The nonprofit insurer aims to nearly double its D-SNP membership to 40,000 by 2027, he said. 

“Adverse selection is not a concern. It's something I’m cognizant of, but it's not something that I'm overly concerned with because we built these products to be utilized,” Robinson said, referring to the possibility of adding too many members that need costly medical treatments. 

However, not all Blue Cross insurers posted big enrollment growth. 

Regence cut non-medical supplemental benefits and stopped selling policies in rural counties after larger rivals exited the market, said William Krenz, senior vice president of government programs. The strategy resulted in enrollment losses consistent with expectations, Krenz said. The company sells Medicare Advantage plans in Idaho, Oregon, Utah and Washington.  

In 2024, the nonprofit insurer reported a 33.4% year-over-year drop in net income to $86.9 million, according to a Modern Healthcare analysis of financial statements obtained from the National Association of Insurance Commissioners. Revenue rose 8.9% to $7.8 billion. Regence's insurance subsidiaries reported an average operating loss of 1.3%. 

The company is watching how Medicare Advantage membership grows during open enrollment, which ends on March 31. 

“We have no desire to grow dramatically,” Krenz said. “There are probably some specific places we can and will, but we also want to be cautious because I'm expecting another fairly challenging year.”