BCBS of Michigan has highest earnings decline among nation's BCBS plans

Twenty-three of the nation's 35 Blues plans reported a total $1.9 billion decrease in earnings during the first three quarters of 2015, and Blue Cross Blue Shield of Michigan was the largest contributor, according to Crain's Detroit Business.

The report's findings are based on a recent report from Fitch Ratings.

Here are four things to know about the report.

1. From the first three quarters of 2014 to the first three quarters of 2015, Blue Cross Blue Shield of Michigan had a 5.2 percent increase in revenue to $8.39 billion. It also had a $230 million loss during the first three quarters of 2015, equaling a 158 percent decline from the first three quarters of 2014.

2. Still, BCBS of Michigan contributed the most to the Blues plans' overall decrease in earnings. For the first three quarters of 2015, BCBS of Michigan reported a $622 million difference in profits to losses. Chicago-based Health Care Service Corp. had the second largest difference at $442 million, and Pittsburgh-based Highmark Group had the third largest difference at $266 million.

3. BCBS of Michigan had high administrative costs. They increased from 13.7 percent of the budget during the first three quarters of 2014 to 16.5 percent of the budget during the same period in 2015.

4. To mitigate and reduce costs, BCBS of Michigan implemented a cost-reduction program last year. In December, Crain's reported the insurer planned to slash expenses by $300 million by 2018, and it has already begun doing so. Over the past few months, more than 24 employees have quit or been laid off.

3. The nation's 35 Blues plans had an average of a 5.7 percent increase in revenue between the first three quarters of 2014 and the first three quarters of 2015. However, during the same time period, they also averaged a 52.1 percent decrease in net income.

4. According to Mark Rouck, Fitch's senior director, the U.S. Blues plans failed due to their strong investment in the federal exchanges and their low-priced plans. In addition, "[e]arnings declines, lower enrollment and moderate revenue growth were challenges for the Blue Cross and Blue Shield companies," Mr. Rouck said.

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