BlueCross BlueShield of North Carolina's medical claims reached a record $7.5 billion in 2020, a 7.7% increase over 2019 that was driven by COVID-19 and specialty drug costs and lower Affordable Care Act plan premiums.
"We saw more than $200 million in COVID-19 claims in 2020 and we expect costs to remain high in the first quarter in 2021," Chief Medical Officer Dr. Von Nguyen said.
The N.C. Blues affiliate added that price increases for cancer treatments and chronic conditions, including hemophilia and autoimmune diseases, drove the higher medical costs, which translated to about $5,800 per fully insured member.
And like other insurers, Blue Cross North Carolina members' use of telehealth surged in 2020, up 7,500% year-over-year. More than 90% of the company's primary care and behavioral health visits were conducted virtually. The payer spent $76 million on virtual encounters in 2020.
"Behavioral health patients prefer it because they don't have to wear masks while they talk for an hour," Nguyen said.
These costs squeezed net income, which fell 47% to $260.5 million for the year ended Dec. 31.
A payment from the now-expired ACA risk-corridor program helped offset the loss. The insurer banked approximately $350 million from a lawsuit related to the ACA program, an initiative created to keep insurance premiums stable by protecting insurers from significant financial losses during the first three years of the public insurance exchanges. The government said it would collect payments from insurers that did well and distribute payments to those with high losses, but eventually did not pay the full amount, arguing that Congress erased its obligation by passing appropriation riders that effectively made the budget neutral. In 2020, the Supreme Court ruled the federal government was obligated to pay up.
Although membership at the insurer grew 1.3% year-over-year to 3.86 million—which includes the 1.1 million individuals the payer manages on behalf of other Blues plans—revenue remained flat at $9.9 billion, which is "primarily the result of another year of rate decreases and indicative of progress moving toward affordability," according to Chief Financial Officer Mitch Perry. He said 2020 was the third year in a row that revenue had remained steady at the insurer.
Going forward, he said he expected the ACA plan market to get only more competitive.
"We continued to face increasing competition with two entrants in the ACA market this year and more expected in 2022," Perry said.
In 2020, the company also inked new value-based care agreements with behavioral health providers last year. More than half of the insurer's members are now associated with providers in value-based care relationships. Additionally, the insurer now counts eight health systems as part of its new Blue Premier value-based payment program and expanded in 2020 its Accelerate to Value program to add 200 independent primary care practices in value-based relationships to its rolls.
A spokesperson said that in the Blue Premier first year, healthcare providers generated an estimated $153 million in cost savings, quality improvements and a slowdown in the rate of spending on healthcare.
Perry noted that increasing consolidation in the industry could offset these costs. He said mergers generally results in higher costs for patients without increasing quality.
"We would want to understand how the proposed consolidation was truly going to lower costs for our customers and our members and, at the same time, improve quality in some way," Perry said.
