BlueCross BlueShield of Tennessee, the state’s largest health insurer, experienced a decrease in claims in 2022 compared to the previous year. However, a drop in investment income led to the company reporting its lowest net income in years. BlueCross aims to limit rising healthcare premiums by implementing measures such as revamping centers, expanding telehealth services, and negotiating discounts with providers. The company maintains strong financial reserves and has an A+ rating from Standard and Poor’s.
BlueCross BlueShield of Tennessee, the largest health insurer in the state, experienced a decrease in claims in 2022 compared to the record high during the pandemic in 2021. However, a decline in investment income impacted the company’s profits.
According to a recent report on its 2022 results, BlueCross BlueShield of Tennessee paid over $16.5 billion in health claims last year, which was $250 million lower than in 2021. Unfortunately, the drop in investment income resulted in the company reporting its lowest net income in years for 2022, earning less than 10% of its long-term profit trend.
In 2022, BlueCross reported a net income of $22 million, equivalent to 0.1% of its revenues. This was significantly lower than its net income of $521 million in 2021 and $355 million in 2020.
BlueCross is a not-for-profit company driven by a mission to improve the health of its 3.3 million members and the communities it serves. As a result, the company targets lower operating margins compared to its competitors, prioritizing operating efficiency and delivering greater value to its members and customers in Tennessee.
Although BlueCross is a non-profit organization, it faces competition from investor-owned companies in the commercial insurance market and is taxed similarly to private insurers. Last year, the company paid $334 million in total taxes. Additionally, BlueCross’s foundation contributed $13.4 million to various community programs, including the establishment of five BlueCross Healthy Places, disaster relief efforts, and education scholarships.
How Premiums Were Spent:
In 2022, a larger portion of total medical costs went towards claims for physician services, increasing from 27% in 2021 to 30% in 2022. This rise was primarily driven by an increase in provider-administered drug costs, which have become more expensive. BlueCross aims to limit these costs through its specialty pharmacy program.
The breakdown of premium spending by BlueCross indicates that 23% was used for inpatient hospital care, while 22% went towards outpatient medical treatments and surgeries. The company paid out 88% of collected premiums to healthcare providers and allocated approximately 9 cents of every premium dollar to process medical claims and handle other expenses related to premium collection, charges, and network administration. Taxes accounted for around 2% of premium costs, and net income comprised less than a penny of every premium dollar paid.
Rising Healthcare Costs:
According to PwC’s Health Research Institute, healthcare costs in the United States increased by an average of 5.5% in 2022, the lowest growth rate in five years. However, consultants predict that healthcare costs will rise by 6% in 2023 and even faster at 7% in the following year.
Healthcare spending accounted for 18.3% of the U.S. gross domestic product in 2021, almost twice the share spent on healthcare costs in other parts of the world.
BlueCross’s Efforts to Limit Rising Premiums:
To control rising healthcare premiums, BlueCross has implemented several measures, including:
– Revamping its Tennessee centers to provide members with access to appropriate care and assistance with all their health insurance plans in one location.
– Expanding access to telehealth and behavioral health through virtual care services.
– Launching tools like AmplifyHealth for large employers to help members find the lowest-cost options for their healthcare needs.
– Lowering the cost of drugs through a specialty pharmacy program, which saved employer groups and members $73 million in 2022.
– Maintaining provider networks that negotiate discounts with hospitals and other healthcare providers, resulting in cost savings for employers. These networks also ensure that providers meet safety and quality standards.
BlueCross has negotiated new contracts with providers, and in some cases, ended contracts with those demanding significant rate increases or receiving higher payments than their peers.
BlueCross’s Financial Reserves and Ratings:
Throughout its 78-year history, BlueCross of Tennessee has consistently reinvested its earnings into reserves, which have grown to $4.1 billion as of the end of last year. This amount is $1.5 billion above the statutory minimum requirement of $2.6 billion. The extra reserves can cover all member claims for approximately 113 days in the event of an emergency.
Maintaining additional reserves is crucial for BlueCross, especially during times of market volatility and economic uncertainty. The company believes it is necessary to have these reserves to handle unexpected emergencies and health crises effectively. Standard and Poor’s, a financial rating service, has given BlueCross of Tennessee an A+ rating.
