The Blues are in the red.
Blue Cross Blue Shield of Michigan reported Wednesday a net loss of $777 million in 2022 due to rising operating costs, losses from its market portfolio and ongoing COVID-19 response.
The Detroit health insurer reported a loss on revenue of $32.8 billion, down from a net income of $360 million on revenue of $32.5 billion in 2021.
Providing health care remains a loss leader for The Blues. BCBSM reported $19.25 billion in revenue from member and self-funded insurer premiums in 2022. But expenses outweighed premiums at $20.11 billion, leading to an $811 million loss on its health care insurance benefits side of the business.
Nationwide membership for BCBSM also dropped by about 2 percent last year, as well, to a total of about 5.19 million.
In 2021, its $374 million loss on providing health insurance was buoyed by a strong investment portfolio that returned $907 million to the insurer.
That portfolio last year, however, suffered under poor corporate performance throughout the public sector, resulting in a $74 million loss.
The Blues’ losses last year were also exacerbated by a one-time charge of $314 million related to the pending sale of its Advantasure subsidiary. In September last year, Aliso Viejo, Calif.-based health insurance administrator UST HealthProof entered into a definitive agreement to buy the Glen Allen, Va.-based Advantasure for an undisclosed sum.
BCBSM formed Advantasure in 2016 to provide back office, compliance and call center services largely to Medicare Advantage plans, which allow private insurers to sell Medicare.
The insurer also paid out $739 million in COVID-related expenses, including $25 million for administering the vaccine, $171 million for testing and $543 million in treating patients.
On an earnings call with reporters, Joe Radtka, vice president of enterprise finance and chief risk officer for BCBSM, could not confirm whether premiums would rise due to the poor financial performance. But he did note that the losses were largely due to the charge related to the Advantasure sale and the investment portfolio.
BCBSM instituted a 6.9 percent increase for 2022 policy renewals and a 6.9 percent rate adjustment for Blue Care Network. BCBSM typically seeks state approval for rate hikes in May.
Despite the losses, BCBSM President and CEO Daniel Loepp believes the nonprofit was successful at weathering tough economic conditions.
“We managed through tremendous volatility in 2022, driven by the lingering economic effects of the pandemic and uneasy financial markets,” Loepp said in a press release. “Despite these challenges, Blue Cross stood behind our members and maintained a strong and stable credit rating.”
The insurer has maintained an A credit rating over the past five years.
Because BCBSM is a nonprofit mutual, meaning it is a taxable organization, it paid $133 million in federal, state and local taxes last year.
Despite the losses in 2022, BCBSM CEO Loepp, 65, earned $17 million, up from $15.6 million in 2021. The top executive's compensation included a $13.9 million bonus, up $1.3 million from the year prior, and a $1.7 million base salary.
From Crain’s Detroit Business.