Blue plans see 18 percent drop in operating earnings for '07

Anne Zieger — Thu, 19 Jun 2008 13:38:21 -0400

A new analysis by healthcare research and consulting firm the Sherlock Co. found that last year was not a good one for the nation's Blue Cross and Blue Shield plans, which lost money despite increased revenue. The Blue plans posted an overall 18.2 percent decline in operating earnings during 2007, though revenue rose 7.4 percent. Among the 39 plans, six actually showed improved operating margins of 1 point or more, but nine had worsening operating margins of at least 3 percentage points, according to Sherlock.

These results come, in part, because the plans' revenues aren't keeping pace with medical costs. The plans' median premium-rate increase during 2007 was 5.4 percent, but median medical costs per member rose by 6.4 percent. What's more, administrative costs grew at a median rate of 7.6 percent per member. Meanwhile, insured membership among the plans fell by 1.4 percent, to 51.5 million, and operating margins dropped 1 point for 2007, to 3.3 percent.

Given these numbers, it seems likely that the Blues will be among the crowd of insurers who raise rates substantially for next year. Several health plans announcing troubling results this year have already vowed to jack up rates for 2009.

To learn more about this study:
- read this Modern Healthcare article (reg. req.)

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Blue plans see 18 percent drop in operating earnings for '07