LITTLE ROCK — Net income at Arkansas Blue Cross and Blue Shield was $24.1 million last year, up nearly 9 percent from $22.2 million in 2008, according to an annual report filed with the Arkansas Insurance Department.
Total revenue at the largest Arkansas-based private health insurer was $1.13 billion, up from $1.06 billion.
Medical and hospital expenses, or claims, at the nonprofit insurer jumped to $948.7 million, up almost 7 percent from $888.9 million in 2008. Included in the total are prescription drug costs, which climbed to $187.6 million, up 13 percent from $166 million in 2008.
“We have been consistently seeing an increase in the number of services [used] and the cost of those servicesis not going down,” spokesman Max Heuer said.
Premiums this year for group coverage are rising an average of about 10 percent, because of the higher claims, Heuer said.
Last fall, Heuer said such premiums were rising 5 percent to 8 percent in 2009. In September, the Henry J. Kaiser Foundation of Menlo Park, Calif., said in an annual report that family premiumsfor employer-sponsored coverage rose 5 percent on average last year.
Blue Cross’ membership in 2009 edged down to 414,618 from 416,197.
The decrease was mostly in the market for smaller employers, Heuer said, where membership fell by about 12,000. Employers weren’t dropping coverage, she said, but some were covering fewer people because of layoffs.
Meanwhile, she said, “there were increases in some of our senior products,” such as Medicare Advantage plans, which are alternatives to traditional Medicare plans.
The insurer’s operating margins, or its net income as a percentage of revenue from premiums, was unchanged at 2.1 percent.
Marianne Udow-Phillips, director of the Center for Healthcare Research & Transformation at the University of Michigan, said such a margin is typical for nonprofit insurers, but generally lower than for-profit firms.
Because of the healthcare law signed into law last month by President Barack Obama, plans next year for large companies will have to spend 85 percent of premiums on medical services, while those in the individual and small group market must pay 80 percent of premiums on medical services, according to a Web site for House of Representatives Speaker Nancy Pelosi.
Blue Cross’ margins, as well as its net income, have been much higher in the past, particularly as it built up reserves in the middle part of the decade, which Heuer said allowed it to hold off from raising premiums in subsequent years.
The organization in 2009 had a 32 percent share of the accident and health market, according to the insurance department. Another 6 percent is controlled by HMO Partners Inc., which is halfowned by a subsidiary of Blue Cross.
Heuer said it’s too soon to say how the health overhaul bill will affect Arkansas Blue Cross, but added that the company believes “benefits are going to cost more. Products are going to cost more.”
“We think everyone should have access to healthcare regardless of any pre-existing conditions, but in that same token, there have to be mechanisms ...to make that concept work and make it affordable for people,” Heuer said.
She said that the company is concerned about the lack of provisions to control costs, such as paying doctors and hospitals not for each procedure, but for a “total package of care” or for certain patient outcomes.
Udow-Phillips said the new law has several provisions aimed at slowing the growth of health-care spending, such as Medicare pilot plans that would include those new ways of paying providers.
She said the effect of the law on premiums will vary by individual. For example, younger people, who often can purchase insurance for lower prices, might see costs rise, but older people could see them drop, because insurers under the law will be more limited on how much they can vary rates.
Business, Pages 29 on 04/02/2010