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BCBS of Minn. Cites Risk Pools for $322.4M in 2016 Losses

Blue Cross Blue Shield of Minnesota mentioned a combination of unbalanced risk pools and rising premium pricing as factors of reported net losses.

Blue Cross Blue Shield of Minnesota cited $333.4M in losses

Source: Thinkstock

By Thomas Beaton

- Blue Cross Blue Shield (BCBS) of Minnesota reported a net operating loss of $322.4 million in their 2016 financial audit, citing unbalanced risk pools and rising premium pricing as a current and future detriment to profitability.

At the end of the year, BCBS Minnesota reported revenues of $12.1 billion, but that was not enough to cover the operating costs. The payer reported an operating margin of 2.7 percent and a pre-tax net loss of $194.4 million once all was said and done.

"A shrinking and unbalanced risk pool, combined with ongoing shifts and instability within state and federal rules, contributed to ongoing volatility within the individual market in 2016," said Michael Guyette, president and CEO of Blue Cross and Blue Shield of Minnesota.

"The high cost of health care has translated to a significant jump in premiums, and the size of the individual market in Minnesota has decreased by one-third since 2014 – a trend we clearly need to reverse. The dollars coming in, via premiums, aren't covering the dollars going out in payments to hospitals, physicians and drug companies."

About 150,000 enrollees joined BCBS Minnesota, jumping from 2.75 million to a total participant pool of 2.9 million. Even with more enrollees, higher risk pools and federal guidelines inhibited BCBS’s ability to produce positive financial outcomes.

The organization spent $11.1 billion on medical claims, which represents 92 cents of every premium dollar from BCBS.

BCBS Minnesota experienced continued losses throughout 2016 within individual markets along with larger-than-anticipated cost pressures and utilization within the Medicaid segment.

This trend has continued for BCBS for the last three years with little profitability from low claims-to-paid revenue ratios.

“Individual segment losses for Blue Cross were $142 million for 2016, compared to a $265 million deficit within the segment for the previous year,” BCBS said.

“While year-over-year losses decreased significantly, enrollment in Blue Cross individual plans declined by approximately the same percentage, resulting in a claims-paid to-revenue-received ratio of 108.6 percent for 2016. Factoring in 2016 results, Blue Cross has lost nearly $538 million on individual plans over the past three years.”

The Blue Cross HMO subsidiary, Blue Plus, also experienced operating losses in the amount of $174.1 million on revenues of $1.8 billion.

Government health programs accounted for 97 percent of Blue Plus’s revenues. Blue Plus cited the Prepaid Medical Assistance Program (PMAP), the Minnesota state Medicaid program, as the reason for the operating losses.

BCBS outlined strategic investments of $20 million in Minnesota communities, new health brands, and portfolio expansions that broke ground during the time of the report.

"Blue Cross remains committed to Minnesota, and we want to ensure that our operations and financial structure support long term success within the state — preserving our ability to provide stable coverage for our nearly 3 million members," said Guyette.

“We're working to shape and rebuild how healthcare is designed, delivered, and experienced to ensure a more affordable and sustainable healthcare system for our members."

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