Blue Cross and Blue Shield of North Carolina said its operations lost money for the second straight year, though strong investment gains led to a $569 million net profit.
The Durham-based insurer’s revenue increased 8% to $10.7 billion as it added more 440,000 Medicaid members under North Carolina’s new managed-Medicaid program. Blue Cross membership soared to 4.3 million, or more than 40% of the state’s population.
Claims and medical expenses rose to $8.2 billion in 2021 with the pandemic and drug costs making up the major drivers of increased spending, the company said. “Claims data also shows members did not defer wellness and preventive care in 2021 as some did in 2020, with claims largely returning to pre-pandemic levels,” according to a press release.
Blue Cross had an operating income ratio of 1.5% in 2019, the last year before the pandemic. It was a negative 0.4% in 2021 and negative 0.2% in 2020. Many not-for-profit hospitals and insurers aim to have operating profit ratios of 4% to 6%, while relying on investment income to provide a cushion during more stressful periods.
Atrium Health, Novant Health and other N.C. health care systems also reported sharp investment portfolio gains last year, buoyed by the strong stock market. But stocks have declined significantly in 2022.
Rising drug costs remain a major challenge with a 10% overall increase and a 15% increase in expenses for specialty drugs to treat diabetes, autoimmune and dermatological conditions, the insurer said. But greater use of telehealth and other innovations helped reign in costs.
“Even as the price tags on medicine and treatment are rising, we were able to keep costs steady for our members,” Chief Financial Officer Mitch Perry said in the press release.
Blue Cross said it ended the year with 5.7 months of reserves, well above the three months required by state law.
The insurer’s not-for-profit status “gives us the flexibility to invest earnings directly toward lowering our customers’ out-of-pocket costs and to make significant investments in capabilities for our members,” Perry said.
