Blue Cross Blue Shield Of Michigan’s Financial Results Show Importance Of Investment Earnings To Nonprofit Health Insurance

The story-behind-the-story in today’s news that Blue Cross Blue Shield of Michigan posted a 1-percent profit margin for 2010 is that none of our health plan’s $222 million in positive net income came from health insurance.

It came primarily from the company’s success as an investor.

More than $440 million in investment earnings put BCBSM — Michigan’s largest insurer — in the black for 2010. The gains did not come from health care premium “profits.” In fact, BCBSM lost $168 million on insurance in 2010.

BCBSM is conservatively invested — with 80 percent of our portfolio in fixed-income securities such as government bonds. Sound management, and changes in interest rates in 2010, maximized the performance of these investments and helped our portfolio achieve more than a 9 percent return.

As a nonprofit health plan, our aim is to help people be covered, and to better afford the cost of health care. Successful management of our sources of income — aside from health insurance premiums — can help us accomplish this on behalf of the 4.3 million Michiganders with Blue Cross cards in their pockets.

Our members expect BCBSM to be financially strong and stable. They also expect that we will provide affordable coverage. This is how we are able to provide the security they deserve.

Our financial results for 2010 offer proof of the critical role that investment earnings play in maintaining BCBSM’s financial strength. Unlike for-profit health insurers, BCBSM does not need to generate hefty profit margins to satisfy investors. We also have a mission to provide health care to all — and we extend coverage to anyone who needs it, regardless of pre-existing conditions or cost. We must maintain adequate revenue and reserves to fulfill this important role.

Insurance premiums did rise in 2010. But successful management of our investment portfolio helped offset our fifth consecutive annual underwriting loss without an over-reliance on premiums to make up the difference. In 2010, our investments gave us the stability to operate our business, the ability to provide comprehensive coverage to millions of residents and the financial strength to fulfill our unique mission.

These are important outcomes that make nonprofit health care possible, even as health care costs continue to increase.

Andrew Hetzel is vice president of Corporate Communications for Blue Cross Blue Shield of Michigan.

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