Blue Cross Says Its Profit Dropped 20% for 2005

By Katie Merx, Detroit Free Press

Mar. 3–Blue Cross Blue Shield of Michigan announced Thursday consolidated net earnings of $336.8 million for 2005, down 20% from 2004.

The nonprofit company reported that its earnings were down because it increased its insurance premiums at a lower average rate than its medical costs rose.

Blue Cross earned its 2005 profit on total revenue of $15.3 billion. The company earned $422.4 million on revenue of $14.8 billion in 2004.

The $85.6-million drop in earnings was by design, company spokesmen said.

The company needed to make less last year because it had more money in reserves — the savings required to cover potential losses — than the minimum required by the national Blue Cross Blue Shield Association or state regulatory mandates.

Its reserves grew to $2.6 billion last year from $2.3 billion in 2004.

During 2005, the company kept the average group premium increase between 7% and 9%.

Mark Bartlett, chief financial officer, executive vice president and president of emerging markets, said medical costs are expected to rise between 8% and 12% annually.

Blue Cross said it plans to keep its average premium increase between 5% and 10% in 2006.

“Our continued financial health is positive news for our group customers, members and medical provider partners,” said Daniel Loepp, Blue Cross Executive Vice President and CEO-designate. “We will continue to price our average group premiums below the overall trend in medical cost, helping to moderate premium increases in 2006.”

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