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McClatchy-Tribune  05/11/2014 4:01 AM ET
Healthy reserves: BlueCross higher profits, reserves position insurer for growth in new health market [Chattanooga Times Free Press, Tenn. :: ]

May 11--Tennessee's biggest health insurer helped insure its own financial health last year by rolling up record profits.

The not-for-profit BlueCross BlueShield of Tennessee boosted its net income in 2013 by 15 percent to a record high of $256 million. The income helped swell BlueCross total reserves at the end of 2013 to $2.3 billion, including $1.8 billion immediately available for paying claims -- more than 36 percent above the state-required minimum.

BlueCross officials say the extra income and reserves last year helped position the Chattanooga-based insurer for this year's challenging expansions under the new health care reform law.

"As a not-for-profit company, we've built up our reserves over 79 years to give us the capital for new initiatives and expansions to serve the market and to make sure we can weather unforeseen problems," BlueCross Vice President Roy Vaughn said.

BlueCross made money on both its commercial and government programs last year. BlueCross's subsidiary which handles the Tenn-Care program, Volunteer State Health Plan, earned $41.7 million, reversing losses the company had from its TennCare operations in previous years.

Five years ago in 2009, Volunteer State Health Plan reported a $95.6 million loss before the state revised the program and BlueCross restructured its operations to limit some of its costs.

BlueCross, which already insures 3.1 million Tennesseans, will pick up even more customers this year as the dominant player among the new health care exchanges offered in Tennessee. But the company's profits could be trimmed this year by higher taxes and lower margins on some operations as the new Affordable Care Act is implemented.

Profits uncertain for some in 2014

Most private health insurers boosted their earnings in 2013, but some firms have warned that profits could be hurt this year because of the costs of new individual customers signing up under the so-called ObamaCare provisions.

"There's a lot of uncertainty," Morningstar Research analyst Vishnu Lekraj said. "We haven't seen a whole quarter or two of claims activity from the exchanges. We don't know what's going to happen there."

BlueCross said last week it enrolled 133,291 Tennesseans through the government's website in the past six months. Many of those were previously uninsured, and the costs of such coverage for the new enrollees could be higher than for most individuals, at least initially, as customers go to doctors and detect previously unknown health problems.

Humana warned last week it expects lower income in 2014, in part, because of lower payments for Medicare Advantage under the new health reform law and because of potentially higher initial claims among those who previously didn't have health insurance and access to most doctors.

"There's still a lot of questions out there about what will happen with the Affordable Care Act, and I think that is causing a lot of concern not only with insurance companies but with businesses in general," said state Sen. Randy McNally, R-Oak Ridge, chairman of the Senate Finance Committee. "I've pushed for state government to have more in reserves, and I think with all of the uncertainty out there about health reform, if I was in the insurance business I would want to make sure I had sufficient reserves to see what was going to happen."

BlueCross says its reserves have grown along with its membership enrollment and were equal last year to what the company pays out in claims in 76 days, down from the 78-day cushion in the previous year.

Even supporters of the new health reform law said the strong fiscal health of BlueCross in Tennessee should help ensure that health plans remain strong and viable.


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