Blue Cross Blue Shield Of Michigan Reports Lower Consolidated Earnings

DETROIT, March 2 /PRNewswire/ -- Blue Cross Blue Shield of Michigan (BCBSM) today announced lower consolidated net earnings for 2005 of $336.8 million, down 20 percent from 2004. The company continues to be financially healthy, which allows the Blues to pump millions of dollars back into supporting rates that are priced well below medical cost trend -- keeping the cost of health insurance within reach for customers. The consolidated results include earnings of the Blues-owned HMO, Blue Care Network, as well as its workers' compensation subsidiary, Accident Fund Insurance Company of America, and its dental PPO network, DenteMax.

As in recent years, the Michigan Blues' earnings margin on its core health care business was below 2 percent. Since 1987, the Blues' average annual underwriting margin on health insurance has been 0.2 percent.

During 2005 the company reduced the average group premium increase to between 7 and 9 percent. BCBSM plans to stay in a similar average range in 2006 -- pricing below medical cost trend. The company also said it will continue to reinvest $200 million to $400 million in a multi-year plan to improve BCBSM's infrastructure and operations to benefit customers, members and health care providers.

Because Blue Cross Blue Shield of Michigan is a nonprofit company, it does not pay out financial dividends to stockholders. The company's earnings go to reserves, where they protect Blues members by ensuring that claims are paid in good times and in bad, and are also used to reinvest in improving the company's ability to serve stakeholders and improve health care coverage.

"Our continued financial health is positive news for our group customers, members and medical provider partners," said Daniel J. Loepp, Blues executive vice president and CEO designate. "We will continue to price our average group premiums below the overall trend in medical cost, helping to moderate premium increases in 2006. We will maintain our multi-year plan to modernize our infrastructure to keep up with customer and provider demands for real-time information and claims processing over the Web. We will carry on our mission to increase access to health care and ensure quality."

The company's 2005 total revenue (premium and premium equivalents that include both fully-insured and self-funded business) was $15.3 billion compared to $14.8 billion in 2004. The consolidated net earnings of $336.8 million included $42.2 million of earnings at BCBSM's for-profit subsidiaries and another $150.3 million primarily from investment earnings on the parent and Blue Care Network's asset portfolio.

"Our for-profit subsidiary businesses and investment earnings continue to fulfill their intended purpose -- strengthening the company financially and making it less reliant on customer premiums for stability," said Mark Bartlett, executive vice president, chief financial officer and president of emerging markets.

A New Strategic Focus in 2006

In early February the company shifted and aligned certain functions and responsibilities under top-level executives to better serve its stakeholders and compete for business in emerging markets. The changes also provide a smooth transition for Daniel J. Loepp, BCBSM executive vice president and CEO designate, when he becomes BCBSM president and CEO following the retirement of current president and CEO Richard Whitmer sometime in mid-2006. The changes include:

* Intensely focusing on identifying and responding to the needs of BCBSM stakeholders through a newly combined division that includes group product development, marketing, corporate communications and Blue Cross Blue Shield Association relations along with the business areas serving the Blues' automotive customers.

* Developing comprehensive product solutions for Blues' customers and expanding into emerging health care markets. A newly designed division combines finance and actuarial functions with responsibilities to develop products for people under 30, lower-cost products for the uninsured market, products for retirees, and dental/vision/hearing products.

* Promoting efficient and advanced member and customer service by combining membership and billing, member servicing, claims processing and information technology operations into a new operations and information technology division.

* Enhancing health care value by sharpening the focus of the health care delivery and medical division on creating new strategies to reduce health care cost and support ongoing Blues collaborative projects with physicians and hospitals to enhance care and improve quality.

* Fulfilling BCBSM's unique social mission by focusing a division of the company on improving BCBSM's ability to serve the people of Michigan through initiatives to improve access to affordable health care and improve the health status of Michigan residents.

Investing in Modernization

BCBSM is continuing its aggressive modernization of its customer service infrastructure to help streamline and manage customer and claims information in real time over the Internet. Some of the initiatives in the multi-year program include:

* Continuing enhancements to Web access so members can log in to , and find additional tools and functions they can use to help them with their interactions with physicians, hospitals and BCBSM.

* Continued upgrades in the tools available to physicians and hospitals so they can enhance their interactions with BCBSM and patients on health care coverage and claims.

"Our goal is to continue to streamline our interactions with physicians, hospitals, customers and other stakeholders and create a more cost-efficient and much better experience for these stakeholders to transact business with the Michigan Blues," Bartlett said.

BCBSM is an insurer of last resort in Michigan which means it offers its coverage to individuals year-round regardless of an individual's health status. Unlike many commercial insurers, the company does not calculate premiums based on an individual's health status.

Blue Cross Blue Shield of Michigan and Blue Care Network are nonprofit corporations and independent licensees of the Blue Cross and Blue Shield Association.

Blue Cross Blue Shield of Michigan

CONTACT: Helen Stojic of Blue Cross Blue Shield of Michigan,+1-313-225-8113

Back to news