Blue Cross Blue Shield of Michigan Experiences Record-Setting Contract Growth; Modest Consolidated Net Income Gains in 2016

Meghan O'Brien

| 4 min read

DETROIT, March 1, 2017 — Blue Cross Blue Shield of Michigan added more than 100,000 new members in 2016 – and will report net income of $122 million on consolidated revenue of $25.9 billion when its audited GAAP financial report is released in May. BCBSM has grown membership for six consecutive years. BCBSM, its Blue Care Network of Michigan HMO subsidiary, and Blue Cross Complete Medicaid HMO had a combined Michigan membership of 4.61 million at year-end 2016. The company’s health membership nationally is 5.34 million. BCBSM also hit three million family contracts for the first time in its nearly 80-year history. “Setting a record for total contracts is an outstanding result. It shows the strength of our brand, the desirability of our products and the strong bonds we have with customers,” said Daniel J. Loepp, BCBSM president and CEO. “We are a member-focused company, and we are grateful to our millions of members across the nation for their confidence and trust.” The company’s $122 million positive financial margin was driven primarily by consolidated gains of $335 million within its investment portfolio and strong financial results delivered by its subsidiary company operations, including Lansing-based AF Group, a national provider of workers’ compensation and other non-health lines of insurance, which delivered a positive net income of $144 million to BCBSM. BCBSM continued to experience an operating/underwriting loss driven by its core health business – but the loss was $98 million lower in 2016 than it was in 2015. The company also paid more than $400 million in taxes on a GAAP basis. “As a nonprofit mutual, we always seek to maximize gains from investments and subsidiaries. Our ability to generate positive income in these areas protects our health insurance customers,” Loepp said. “In 2016, our company successfully transitioned our Medigap subsidy to the Michigan Health Endowment Fund. This will help lower-income seniors by promoting affordable coverage, while also helping our health insurance business get out from under a huge financial burden that negatively affects its annual performance.” The operating/underwriting loss of $180 million for 2016, compared to a $278 million operating/underwriting loss in 2015, included $242 million of losses from BCBSM’s Legacy Medigap supplemental product. Subsidization of Medigap concluded on Dec. 31, 2016. BCBSM/BCN also lost $68 million in the Affordable Care Act market for individual health plans – a better result if compared to the larger losses incurred around the nation by other carriers. The company’s Risk Based Capital (RBC) finished 2016 at 547 percent from the previous year’s 574 percent. The year-over-year RBC decline was caused by strong growth in insured business, which increased capital requirements. Because the final RBC reflects a financially strong company, it will trigger a payment of $60 million to the Michigan Health Endowment Fund. When this payment is made, BCBSM will have sent $270 million of a total $1.56 billion commitment to the Fund, enabling it to invest in protecting the state’s vulnerable and subsidizing Medigap coverage. In 2016, BCBSM continued its joint venture with Philadelphia-based AmeriHealth Caritas to serve an expanded population of Medicaid and Healthy Michigan Plan consumers in Michigan with Blue Cross Complete. BCBSM is a minority owner of AmeriHealth Caritas. Additionally, the company invested in its Emerging Markets division, adding capabilities to deliver solutions and partner with health plans nationwide on their Medicare offerings. Medicare is a growth market nationally, with more than 75 million Baby Boomers expected to be Medicare eligible over the next decade. Statutory Financial Reporting Information BCBSM also will file a financial statement with the State of Michigan that is based on a different accounting standard – Statutory Accounting Principles (SAP). This accounting method does not include subsidiaries and some investments, and has other differences from GAAP. It is required by state regulators, but does not represent a comprehensive consolidated view of BCBSM’s enterprise financial performance as a nonprofit mutual. Under SAP accounting, the company posted a statutory net loss of $226 million on revenue of $7.9 billion in 2016. Blue Cross Blue Shield of Michigan, a nonprofit mutual insurance company, is an independent licensee of the Blue Cross and Blue Shield Association. BCBSM provides and administers health benefits to more than 4.6 million members residing in Michigan in addition to employees of Michigan-headquartered companies who reside outside the state. For more company information, visit and Photo Credit: Isaac Bowen
MI Blues Perspectives is sponsored by Blue Cross Blue Shield of Michigan, a nonprofit, independent licensee of the Blue Cross Blue Shield Association