After its administrative costs, BCBSM posted a $1.7 billion operating loss, a -4.2% margin.
The mounting losses are attributed to a sharp rise in utilization of healthcare services by its members.
It’s the fourth consecutive year BCBSM has paid out with costs more in medical claims than its collected in premiums.
Medical claims were $2.1 billion more in 2024 over 2023, the company said in a press release. Pharmacy costs also continue to climb, with a $900 million increase over 2023.
Popular GLP-1 drugs, used for diabetes treatment and weight loss, cost the insurer $1.1 billion last year, a 29% increase over the year prior.
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Though those losses may ease moving forward after the insurer dropped coverage for GLP-1 obesity drugs, including Wegovy, Saxenda and Zepbound, for all fully insured members on Jan. 1.
Paul Mozak, executive vice president and CFO, said in a media call that utilization has risen across nearly all aspects of care. A major increase was in the Medicare and elderly population, including 12.5% increase in heart disease, 17% rise in cancer and a 16% rise in kidney disease since 2019.
“Health insurers are facing significant economic headwinds — especially nonprofit carriers like us — that are jeopardizing the affordability of health insurance for employers and families across the country,” Tricia Keith, new president and CEO of BCBSM, said in a press release. “In Michigan, Blue Cross is working diligently to manage the dramatically increasing cost and use of health care services. But we can’t do this work alone. Collaborating with partners across the health care ecosystem is essential to identifying solutions to maintain health care affordability for our members and group customers.”
Keith is leading a cost-cutting initiative at BCBSM called Blue Cross Accelerated that aims to cut $600 million in administrative costs.
Keith told Crain’s in January that health systems and providers need to work harder to cut their own costs as well.
She said in-state consolidation of health systems — Corewell, University of Michigan Health and Henry Ford Health have participated in major mergers and acquisitions in recent years — has raised healthcare costs.
“The challenges in Michigan … a big one is the provider landscape with hospitals,” she said. “In 2019, the core three hospitals in the state had a 30% market share. Now it’s 64%. The question is how do they balance that desire to build and grow with affordability?”
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The Blues are also working to get as many physician groups as it can into value-based contracts — deals with the providers that put some financial risk on the doctors’ groups for outcomes. A full-risk arrangement puts financial liability on the physicians' organization in exchange for a larger potential reimbursement for high-quality care. When physicians meet outcome and cost goals for each patient, they get paid more by BCBSM. But if those goals are not met and a patient's outcome worsens, the physicians’ group is responsible for any added expenses, tests and treatments.
BCBSM’s losses were dampened by its large investment portfolio, which generated $671 million in income in 2024, and by the performance of its subsidiaries like the AF Group, which generated $204 million in income.
But it’s not expecting those solutions to offset rising healthcare costs. The Blues’ financial statement includes $432 million change in premium deficiency reserves, up from $20 million in 2023. That means the company is accounting for larger medical and pharmacy payouts in 2025 than the revenue it’s receiving in premiums. BCBSM raised premiums 11.5% this year.
BCBSM, the largest health insurer in Michigan, has been shedding market share for years but still controls 46% of the market. Its membership dropped by about 1.5%, or 64,000 members, in 2024 to 5.14 million.
Mozak said the decline was largely due to reduced Medicaid coverage after the end of the COVID-19 emergency declaration.
Despite its financial troubles, outgoing CEO Dan Loepp received a more than $13.9 million compensation package, including a $10.8 million bonus.
Loepp stepped aside as CEO on Jan. 1. Keith’s total compensation will be reported next year, but her base salary is $1.3 million.
This story first appeared in Crain's Detroit Business.
