After transitioning from tax-exempt nonprofit to a tax-paying, mutually-owned company, Michigan's largest health insurer is in pretty good financial health.
Blue Cross Blue Shield of Michigan posted net income of $272 million for 2014, a cool one percent margin on revenue of just over $23 billion.
About 30 percent of that income came from an underwriting gain in BCBSM's core health insurance business covering 4.5 million Michiganders. The rest came from the insurer's investment portfolio (yielding $290 million) and contributions by subsidiaries.
"In our first year as a nonprofit mutual insurer, Blue Cross grew our membership significantly, competed successfully on the new health insurance marketplace, and continued to expand value-based healthcare delivery," said Daniel Loepp, BCBSM president and CEO.
2014 was the fourth straight year of membership growth for BCBSM, increasing by 115,000. The insurer sold about 65 percent of the state's public exchange plans, as one of 16 insurers competing in the federally-run marketplace, and enrolled another 100,000 in unsubsidized individual plans.
"Our financial performance reflects that of a nonprofit company that is true to its purpose," said Loepp, now in his ninth year as CEO. "Our model is to have strong investment and subsidiary performance that helps offset low margins on health insurance."
In 2013, BCBSM was restructured into a nonprofit mutual company, under a new state law, after more than 30 years as a tax-exempt health plan serving as an "insurer of last resort," before the Affordable Care Act's created guaranteed issue.
In the transition, BCBSM has retained a formidable market share of around 65 percent, while largely maintaining healthy finances, which in 2013 earned an "A" rating from Standard and Poor's. Last year, though, its risk-based capital decreased slightly by 42 points, to 667 percent, "driven by a larger component of fully insured business which carries a higher risk charge."
Nonetheless, the insurer is making well enough to pay into the Michigan Health Endowment Fund created in the reorganization, with $50 million projected for this year and a full $1.5 billion expected over the next two decades.
BCBSM has kept a large public presence, sponsoring all kinds of local events and initiatives, such as Chinese Lunar New Year celebrations and the Detroit Riverfront Run/Walk 5K. "The strongest companies seek to strengthen the communities where they do business," Loepp said. Andy Hetzel, vice president of communications, is a also regular guest on Michigan's Big Show, a syndicated radio program.
Since the advent of health reform and even before,, BCBSM has been trying to move towards value-based healthcare reimbursement, along with many other Blues. The company now has non-fee-for-service, value-based arrangements with more than half of Michigan's hospitals, including recent deals with Henry Ford Health System and the University of Michigan Health System.
BCBSM also started recently a novel collaboration with the University of Michigan Health System to offer the state's physicians a comprehensive resource for evidence-based practices in genomics and personalized medicine.
The first of 21 new projects in the the Michigan Blues' Collaborative Quality, the consortium will "help physicians and their patients make important decisions about whether or not to get tested and, when testing is indicated, which tests will best meet their health needs and goals," said David Share, MD, senior vice president of value partnership.
Another Blue restructuring, Independence "We're redesigning a 75-year-old structure that reflects our past, not our present or our future."