2023 Annual Report: A Message from Our Chief Financial Officer

Paul Mozak

| 3 min read

Paul Mozak is executive vice president and chief fin...

Paul Mozak is executive vice president and chief financial officer at Blue Cross Blue Shield of Michigan.
Blue Cross Blue Shield of Michigan continues to navigate financial headwinds specific to the health care industry, including cost pressures brought on by increased utilization of medical services and the demand for high-cost pharmaceuticals.
Despite experiencing over $3 billion in increased claims costs in 2023, Blue Cross Blue Shield of Michigan reported a marginally positive net gain of $100 million on enterprise revenue of $36.3 billion. The challenges posed by the dynamic health care environment had a significant impact on our bottom line. In 2023, we reported an underwriting loss of $544 million. These losses were alleviated by strong performance from our investment portfolio and by profits earned by subsidiaries – bringing the positive bottom line to $100 million, or 0.2 percent of revenue. As a nonprofit mutual insurer, Blue Cross Blue Shield of Michigan strives to manage our operating margin close to break-even. This result is consistent with the company’s average annual operating margin over the past 10 years of less than one percent of revenue.
The significant increase in claims costs for medical services were directly related to hospital-administered drugs, imaging and diagnostic services. Additionally, an increase of $1.8 billion in pharmacy claims costs was led by soaring prices for autoimmune drugs and for GLP-1 drugs for diabetes and weight management.
Our diversified business model helped us manage this challenging year. Our underwriting losses were offset by gains in other areas of our diverse enterprise portfolio like our wholly owned workers compensation and specialty insurance subsidiary, AF Group, contributing $153 million to enterprise results.
Importantly, even with the unforeseen pressures, we maintained a strong and stable credit rating. Blue Cross and AF Group maintained an A (Excellent) rating with a “stable” outlook from AM Best, a nationally recognized ratings agency. This is the fifth consecutive year that Blue Cross has received an “A” (Excellent) rating. This is good news for our customers and other stakeholders and reflects the hard work and dedication of our employees and management.
We continued to support the state’s health care ecosystem as Blue Cross and our subsidiaries paid an average of $88 million per day to support care and benefits for insured members, and we remained dedicated to the health of all Michiganders with total payments to the Michigan Health Endowment Fund at $910 million as of April 2024. The Health Fund backs programs that protect the state’s most vulnerable residents.
Despite the challenges of 2023, Blue Cross Blue Shield of Michigan is a financially strong and stable corporate enterprise. We will remain vigilant and proactive in addressing challenges in the evolving health care landscape to keep health care affordable and accessible for our members.
Paul Mozak is executive vice president and chief financial officer at Blue Cross Blue Shield of Michigan.
MI Blues Perspectives is sponsored by Blue Cross Blue Shield of Michigan, a nonprofit, independent licensee of the Blue Cross Blue Shield Association