- BlueCross BlueShield companies saw a total tax savings of $2.3 billion after passage of last year’s Tax Cuts and Jobs Act (TCJA), according to a new creditor’s briefing from AM Best.
BCBS companies reported a mix of gains and losses under the TCJA, but the new corporate tax rate of 21 percent helped offset BCBS tax losses across the US.
Health Care Service Corporation, a BCBS organization that experienced tax losses in 2015, reported significant tax alleviations in 2017. The company had increased their tax-related revenues from $80 million at the end of 2016 to $3.2 billion by 2017. Two BCBS payers had net changes of deferred income tax by $500 million and five payers saw increases of $100 million or more after the bill’s passage.
Fifteen BCBS companies reported a tax benefit of nearly $4.7 billion before accounting for net changes in tax assets. Only two BCBS payers had tax losses after accounting for changes in the TCJA.
AM Best concluded that the tax breaks helped spur new initiatives from BCBS companies to address healthcare costs and access challenges for beneficiaries.
Health Care Service Corporation, the largest beneficiary of the TCJA, announced a $1.5 billion commitment to lower care costs for their members.
Source: AM Best
Horizon Healthcare Services plans to use their tax break to improve behavioral and mental healthcare for their members and return $125 million directly back to their beneficiaries. Other BCBS payers also committed to using the funds to lower member premiums and expand healthcare access in rural areas.
The TCJA may have created profitability concerns within the individual health plan market because the legislation included the repeal of the Affordable Care Act’s individual mandate. The repeal of the mandate recently influenced insurers’ early requests to raise premium rates for plan year 2019.
AM Best believes that BlueCross BlueShield payers will continue to benefit from the law and effectively navigate future changes in healthcare costs, policy, and other market forces.
“Despite unanticipated financial windfall from the TCJA, AM Best expects the affected Blues will continue to balance growth and profitability to sustain future capital levels,” said AM Best. ”This is especially important given the potential volatility of healthcare costs and intense competition from the publicly traded large-scale organizations.”