EAGAN, Minn., April 3, 2017 /PRNewswire/ -- Blue Cross and Blue Shield of Minnesota and its family of companies (Blue Cross) today announced audited financial results for 2016. Blue Cross ended the year with a net operating loss of $322.4 million on full-year revenues of $12.1 billion, for a negative operating margin of 2.7% and a pre-tax net loss of $194.4 million. For the year, $11.1 billion of medical claim payments were incurred which represented 92 cents of every premium dollar going directly to cover health care costs. Additionally, total member enrollment grew from 2.75 million to 2.9 million members.
The 2016 operating deficit represents continued losses in the individual market and larger than anticipated cost pressures and utilization within the Medicaid segment.
Individual segment losses for Blue Cross were $142 million for 2016, compared to a $265 million deficit within the segment for the previous year. 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% for 2016. Factoring in 2016 results, Blue Cross has lost nearly $538 million on individual plans over the past three years.
"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."
Blue Plus, the HMO subsidiary of Blue Cross and Blue Shield of Minnesota, reported an operating loss of $174.7 million on revenues of $1.8 billion, for a negative operating margin of 9.6%. The administration of government health programs accounted for 97% of 2016 revenue. The overall performance of Blue Plus was driven by $167 million in operating losses in the Prepaid Medical Assistance Program (PMAP), the state Medicaid program in Minnesota.
"Our HMO expanded its Medicaid presence across the state in 2016, and in turn, saw our enrollment triple," Guyette said. "With unprecedented growth in Medicaid utilization levels, current reimbursement rates are not sustainable for the marketplace. As a key Medicaid insurer, Blue Plus is working with health care providers to strengthen efforts to contain costs in the face of rapidly rising per-enrollee spending."
In addition to these financial results, Blue Cross undertook several initiatives in 2016, including:
Announced plans for a new health brand to advance innovation and diversification strategies and extend the portfolio of diversified companies
Launched a new four-year strategic plan to advance four key business goals: consumer loyalty, net revenue growth, health improvement and financial stability
Set a company record in the acquisition of new small employer group business
Opened the first Blue Cross retail center in Greater Minnesota, making Duluth the company's third retail location to open in three years
Introduced a new ancillary portfolio of Blue-branded dental and vision products
Achieved a 4 star rating and 4.5 star rating on the SecureBlueSM Minnesota Senior Health Options plan and Platinum BlueSM with Rx Cost Plan, respectively, from the Medicare STARs program
Invested more than $20 million in Minnesota communities through the Blue Cross and Blue Shield of Minnesota Foundation and Center for Prevention
"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."
Audited results include the consolidated financial statements for businesses operating under Aware Integrated Inc. (AII), a nonprofit corporation and parent organization. AII serves as the holding company for all affiliates and subsidiaries, including the following regulated businesses associated with Blue Cross:
Blue Cross and Blue Shield of Minnesota — A nonprofit health insurance company and independent licensee of the Blue Cross and Blue Shield Association.
Blue Plus® — A nonprofit HMO that offers health plans and contracted provider networks throughout Minnesota to individuals and local, state and national groups.
SelectAccount® — A third-party administrator of medical spending accounts included in consumer-directed health plans throughout the country.
Blue Cross provides all information, reports and audited details as required by the State of Minnesota for both commercial and public program products. Detailed financial statements for the organization's regulated businesses are filed with the Minnesota Department of Commerce.
MII Life, Inc., dba SelectAccount, is an independent company providing account administration services.
About Blue Cross and Blue Shield of Minnesota Blue Cross and Blue Shield of Minnesota, with headquarters in the St. Paul suburb of Eagan, was chartered in 1933 as Minnesota's first health plan and continues to carry out its charter mission today: to promote a wider, more economical and timely availability of health services for the people of Minnesota. A nonprofit, taxable organization, Blue Cross is the largest health plan based in Minnesota, covering 2.9 million members in Minnesota and nationally through its health plans or plans administered by its affiliated companies. Blue Cross and Blue Shield of Minnesota is an independent licensee of the Blue Cross and Blue Shield Association, headquartered in Chicago. Go to bluecrossmn.com to learn more.