PROVIDENCE, R.I. (WPRI) – Blue Cross & Blue Shield of Rhode Island lost $35 million in 2016 as its members increased their use of medical services more than expected, according to regulatory filings reviewed by Eyewitness News.
It was the third annual loss in the past five years for Rhode Island’s dominant health insurer.
Blue Cross officials noted, however, that the results for 2016 marked an improvement from where the nonprofit insurer stood halfway through the year, at which point it had lost $52 million. Total annual revenue rose 2.4% to $1.7 billion.
“Collectively, we have to create a path to affordable and simple health care in Rhode Island,” Blue Cross President and CEO Kim Keck said in a statement. “Health care costs in our state rank in the top 10 in the country.” She urged an effort “to accelerate the coordination of patient care, innovate lower-cost solutions and enable better health care information.”
Keck, formerly a senior vice president at Aetna, officially succeeded Peter Andruszkiewicz as Blue Cross’s new president and CEO in June.
The insurer’s net reserves – a key measure of its solvency – shrank from $294 million to $267 million compared with the end of 2015, a drop of 9%. Blue Cross Chief Financial Officer Mark Stewart said the amount is “more than adequate, and we are confident that we have a strategy in place to maintain adequate and stable reserves.”
Another key measure, its insurance underwriting, showed a loss of $22 million in 2016 after a profit of the same amount the prior year.
The filings show Blue Cross paid Andruszkiewicz $1.5 million in 2016, which included a $432,000 exit payment when he left the company. Keck, his successor as CEO, earned $450,000 for the year, which included a $50,000 bonus. Also earning seven-figures was Michael Hudson, the insurer’s chief financial officer until the middle of 2016, who was paid nearly $1.1 million.
Rhode Island’s other two major health insurers said they were in the black in 2016. Neighborhood Health Plan posted a profit of $20 million on $1.1 billion of revenue, and UnitedHealthcare of New England ran a profit of $13 million on $867 million of revenue, their filings show.
Blue Cross said the rising use of medical services it saw was especially significant in the categories of “costly orthopedic services,” such as knee and hip replacements, and high-priced specialty drugs.
“The older we are the more we need health care services and Rhode Island ranks first in the nation for people aged 85 and older and 8th-highest in median age,” Stewart noted.
The insurer’s leaders said they are hopeful about the potential to improve its finances through the use of so-called “patient-centered medical homes,” which centralize and coordinate decisions about an individual’s health care, as well as improved technology.
“Our experience is that we can improve quality and manage costs for our members by focusing on data-driven practices and contract incentives for care coordination,” said Dr. Gus Manocchia, Blue Cross’s chief medical officer.Ted Nesi (firstname.lastname@example.org) covers politics and the economy for WPRI.com. He writes Nesi’s Notes on Saturdays and hosts Executive Suite. Follow him on Twitter, Facebook and Instagram