Skip to main content
Subscribe
  • Sign Up Free
  • Login
  • Subscribe
  • News
    • Current News
    • Providers
    • Insurance
    • Government
    • Finance
    • Technology
    • Safety & Quality
    • Digital Health
    • Transformation
    • ESG
    • People
    • Regional News
    • Digital Edition (Web Version)
    • Patients
    • Operations
    • Care Delivery
    • Payment
    • Midwest
    • Northeast
    • South
    • West
  • Opinion
    • Bold Moves
    • Breaking Bias
    • Commentaries
    • Letters
    • Vital Signs Blog
    • From the Editor
  • Events & Awards
    • Awards
    • Conferences
    • Galas
    • Virtual Briefings
    • Webinars
    • Nominate/Eligibility
    • 100 Most Influential People
    • 50 Most Influential Clinical Executives
    • Best Places to Work in Healthcare
    • Excellence in Governance
    • Health Care Hall of Fame
    • Healthcare Marketing Impact Awards
    • Top 25 Emerging Leaders
    • Top Innovators
    • Diversity in Healthcare
      • - Luminaries
      • - Top 25 Diversity Leaders
      • - Leaders to Watch
    • Women in Healthcare
      • - Luminaries
      • - Top 25 Women Leaders
      • - Women to Watch
    • Digital Health Transformation Summit
    • ESG: The Implementation Imperative Summit
    • Leadership Symposium
    • Social Determinants of Health Symposium
    • Women Leaders in Healthcare Conference
    • Best Places to Work Awards Gala
    • Health Care Hall of Fame Gala
    • Top 25 Diversity Leaders Gala
    • Top 25 Women Leaders Gala
    • - Hospital of the Future
    • - Value Based Care
    • - Hospital at Home
    • - Workplace of the Future
    • - Digital Health
    • - Future of Staffing
    • - Hospital of the Future (Fall)
  • Multimedia
    • Podcast - Beyond the Byline
    • Sponsored Podcast - Healthcare Insider
    • Video Series - The Check Up
    • Sponsored Video Series - One on One
  • Data Center
    • Data Center Home
    • Hospital Financials
    • Staffing & Compensation
    • Quality & Safety
    • Mergers & Acquisitions
    • Data Archive
    • Resource Guide: By the Numbers
    • Surveys
    • Data Points
  • Newsletters
  • MORE+
    • Contact Us
    • Advertise
    • Media Kit
    • Jobs
    • People on the Move
    • Reprints & Licensing
MENU
Breadcrumb
  1. Home
  2. Insurance
March 02, 2021 01:25 PM

Michigan Blues post lowest operating profits in four years amid COVID-19 pandemic

Crain's Detroit Business
Jay Greene
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
  • Michigan Blues' operating profits, total net income declined due to COVID-19 effects
  • Investment portfolio gains of $724 million stabilized business
  • Company total margins dropped to 2.1 percent from 2.7 percent in 2019
  • BlueCrossBlueShieldSign-main_i_i_i.jpg

    Blue Cross Blue Shield of Michigan experienced a 52 percent drop in operating profits in 2020, illustrating the challenges the state's largest health insurer faced during the beginning of the COVID-19 pandemic.

    The not-for-profit mutual health insurer reported $120 million in operating income last year, the lowest amount in four years, compared with $248 million in 2019.

    But strong investment income gains of $724 million from company's conservatively invested portfolio of stocks and bonds led to after-tax net income of $646 million on $30.1 billion in revenue, a 2.1 percent total margin. Blue Cross earned $603 million on its portfolio investments in 2019.

    The Michigan Blues in 2020 also paid $192 million in federal taxes, according to the company's consolidated business financial statement. But when state and local taxes are included, Blue Cross paid a total of $388 million for last year, the company said.

    In 2019, the Michigan Blues posted net income of $818 million on revenue of $30.2 billion last year for a 2.7 percent margin. Last year, Blue Cross paid $26 million in federal taxes.

    Previous years' total margins, which include investment income, have been strong at 1.9 percent in 2018 and 4.4 percent in 2017, when the Michigan Blues posted record profits of $1.2 billion on consolidated revenue of $26.9 billion.

    Net income figures include Blues' various subsidiaries, investment income minus federal taxes, according to Blue Cross' calculations based on generally accepted accounting principles.

    But on operations over the past three years, Blue Cross' operating income has slid 81 percent from $632 million in 2018 to $120 million in 2020. Still, officials say operating margins have averaged just under 1 percent the past decade.

    "Since the beginning of the COVID-19 pandemic, Blue Cross and Blue Care Network have put the health of our members and customers at the forefront — ensuring no-cost services for COVID testing and treatment, providing free telemedicine services for months, and delivering premium refunds," Daniel Loepp, Blue Cross' president and CEO, said in a statement.

    Paul Mozak, senior vice president for finance and chief risk officer, said Blue Cross was heavily impacted by the COVID-19 pandemic.

    "Like all businesses, the Blue Cross Blue Shield of Michigan enterprise was confronted with unprecedented volatility and disruption," Mozak said. "We were able to weather that disruption and uncertainty, in part, by keeping our health business focused squarely on supporting the needs of our members, our group customers, provider partners and communities."

    Mozak said Blue Cross' financial contribution in response to the COVID-19 pandemic totaled $1.3 billion, including no-cost care ($35 million), no telemedicine copays ($65 million), no-cost testing ($39 million) and insurance premium refunds ($115 million).

    Blue Cross kept financial stability by its "outstanding returns" with its investment portfolio, but also generated positive revenue through its health insurance business line and its subsidiary companies, Mozak said.

    The Michigan Blues enjoyed profits from its managed care plan, Blue Care Network, its workers' compensation company Accident Fund Insurance Co. of America, and a for-profit joint venture with Philadelphia-based AmeriHealth Caritas on Medicaid plans, which includes Blue Cross Complete, along with other subsidiaries.

    For example, the for-profit subsidiary AF Group earned $17 million last year, down from $116 million in 2019. Based in Lansing, AF Group is one of the largest specialty writers of workers' compensation insurance in the nation.

    A Blue Cross spokesperson said the AF Group was impacted by the COVID-19 pandemic and the associated economic downturn, resulting in lower revenue in some segments and higher claims.

    Based on its financial performance, Blue Cross contributed an additional $85 million to the Michigan Health Endowment Fund, a foundation created in 2013 by state legislation that allowed Blue Cross to convert into a nonprofit mutual health insurer from its designation as the state's "insurer of last resort."

    Over the past five years, Blue Cross has contributed $610 million to the foundation toward its required corpus of $1.56 billion. Each year, the foundation doles out millions of dollars to worthy health care causes and organizations.

    Blue Cross Michigan total membership dipped by 41,430 members in 2020, primarily because of national job losses. It now covers 5.343 million members in 50 states. The membership numbers include Blue Cross, Blue Care and Blue Cross Complete.

    Small group membership, impacted heavily by the COVID-19 public health shutdowns, declined by 7,833 to end the year at 294,800 members. Individual plan membership declined by about 15,000 to 170,200 members.

    However, Medicare Advantage grew by 65,060 to total 591,349. Medicaid membership also grew by 80,000 members to 289,000 members.

    Blue Cross also files a slightly different financial statement to the Michigan Department of Insurance and Financial Services under statutory accounting principles, which excludes Blue Cross subsidiaries and some investments.

    Under SAP accounting, Blue Cross posted $88 million in underwriting gains on revenue of $9.34 billion in 2020. As a result, under SAP, Blue Cross' risk-based capital ratio improved from 712 percent in 2019 to 742 percent last year. RBC is a measure of financial stability.

    In 2019, Blue Cross earned $166 million in underwriting gains on SAP revenue of $9.2 billion in 2019. In 2017 and 2018, Blue Cross posted underwriting profits that totaled about $900 million. But lost a total of $570 million on operations in 2015 and 2016.

    Letter
    to the
    Editor

    Send us a letter

    Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.

    Recommended for You
    diversity2_i.png
    How Connecticut's Broker Academy targets health disparities
    cybersecurity_i.jpg
    Massachusetts health insurer faces ransomware attack, member data at risk
    Most Popular
    1
    More healthcare organizations at risk of credit default, Moody's says
    2
    Centene fills out senior executive team with new president, COO
    3
    SCAN, CareOregon plan to merge into the HealthRight Group
    4
    Blue Cross Blue Shield of Michigan unveils big push that lets physicians take on risk, reap rewards
    5
    Bright Health weighs reverse stock split as delisting looms
    Sponsored Content
    Daily Finance Newsletter: Sign up to receive daily news and data that has a direct impact on the business and financing of healthcare.
    Get Newsletters

    Sign up for enewsletters and alerts to receive breaking news and in-depth coverage of healthcare events and trends, as they happen, right to your inbox.

    Subscribe Today
    MH Magazine Cover

    MH magazine offers content that sheds light on healthcare leaders’ complex choices and touch points—from strategy, governance, leadership development and finance to operations, clinical care, and marketing.

    Subscribe
    Connect with Us
    • LinkedIn
    • Twitter
    • Facebook
    • RSS

    Our Mission

    Modern Healthcare empowers industry leaders to succeed by providing unbiased reporting of the news, insights, analysis and data.

    Contact Us

    (877) 812-1581

    Email us

     

    Resources
    • Contact Us
    • Advertise with Us
    • Ad Choices Ad Choices
    • Sitemap
    Editorial Dept
    • Submission Guidelines
    • Code of Ethics
    • Awards
    • About Us
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Modern Healthcare
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • News
      • Current News
      • Providers
      • Insurance
      • Government
      • Finance
      • Technology
      • Safety & Quality
      • Digital Health
      • Transformation
        • Patients
        • Operations
        • Care Delivery
        • Payment
      • ESG
      • People
      • Regional News
        • Midwest
        • Northeast
        • South
        • West
      • Digital Edition (Web Version)
    • Opinion
      • Bold Moves
      • Breaking Bias
      • Commentaries
      • Letters
      • Vital Signs Blog
      • From the Editor
    • Events & Awards
      • Awards
        • Nominate/Eligibility
        • 100 Most Influential People
        • 50 Most Influential Clinical Executives
        • Best Places to Work in Healthcare
        • Excellence in Governance
        • Health Care Hall of Fame
        • Healthcare Marketing Impact Awards
        • Top 25 Emerging Leaders
        • Top Innovators
        • Diversity in Healthcare
          • - Luminaries
          • - Top 25 Diversity Leaders
          • - Leaders to Watch
        • Women in Healthcare
          • - Luminaries
          • - Top 25 Women Leaders
          • - Women to Watch
      • Conferences
        • Digital Health Transformation Summit
        • ESG: The Implementation Imperative Summit
        • Leadership Symposium
        • Social Determinants of Health Symposium
        • Women Leaders in Healthcare Conference
      • Galas
        • Best Places to Work Awards Gala
        • Health Care Hall of Fame Gala
        • Top 25 Diversity Leaders Gala
        • Top 25 Women Leaders Gala
      • Virtual Briefings
        • - Hospital of the Future
        • - Value Based Care
        • - Hospital at Home
        • - Workplace of the Future
        • - Digital Health
        • - Future of Staffing
        • - Hospital of the Future (Fall)
      • Webinars
    • Multimedia
      • Podcast - Beyond the Byline
      • Sponsored Podcast - Healthcare Insider
      • Video Series - The Check Up
      • Sponsored Video Series - One on One
    • Data Center
      • Data Center Home
      • Hospital Financials
      • Staffing & Compensation
      • Quality & Safety
      • Mergers & Acquisitions
      • Data Archive
      • Resource Guide: By the Numbers
      • Surveys
      • Data Points
    • Newsletters
    • MORE+
      • Contact Us
      • Advertise
      • Media Kit
      • Jobs
      • People on the Move
      • Reprints & Licensing