ND Blue Cross Blue Shield finances back in the black
FARGO — Blue Cross Blue Shield of North Dakota finished the last quarter with net income of $27 million, rebounding from a loss of $80.7 million at the end of last year.
As of June 30, the North Dakota Blues’ capital and surplus totaled $219.6 million, up $20.5 million from Dec. 31, another sign of more favorable financial trends since the heavy losses last year that resulted in the ouster of the top executive in May.
The bulk of last year’s loss – $51 million – stemmed from a subsidiary’s involvement in establishing a troubled Maryland health insurance exchange.
Those losses cannot be used to justify future premium increases, executives and insurance regulators said, but the financial health of North Dakota’s largest health insurer, which covers 500,000 people, is closely tracked to ensure its viability.
Gains reflected in the financial report for the quarter ending June 30, made available Monday, also showed an increase of $16 million from Blue Cross Blue Shield insurance operations, up from a $25.2 million loss at the end of last year.
"It’s a reasonably good start to the year," said Tim Huckle, who became chief executive officer last month after a long stint as Blue Cross Blue Shield’s chief operating officer. "It has six more months to play out. We hope it continues as we see it."
Adam Hamm, North Dakota insurance commissioner, agreed that the financial trends in Blue Cross Blue Shield’s latest report, including a surplus that is up 10.3 percent, are favorable.
"Overall, all of these numbers show things are improving, obviously a positive sign," Hamm said.
Looming on the horizon, however, is potential financial fallout involving a botched state health insurance exchange created by a Blue Cross Blue Shield subsidiary, Noridian Healthcare Services.
The Maryland Health Benefit Exchange in February terminated its contract with Noridian Healthcare Solutions, the prime contractor on the project.
Maryland officials, who paid Noridian about $55 million toward what would have been a $193 million, five-year contract, have said they could sue Noridian Healthcare Solutions.
In turn, Noridian has placed much of the blame on a Maryland subcontractor, EngagePoint. The two firms’ dispute, involving claims and counterclaims, remains in arbitration.
"NHS’s contract with EngagePoint specifies that EngagePoint shares equally in the profits earned or losses incurred by NHS on the Maryland Health Benefit Exchange project, so EngagePoint is responsible for at least half of the financial losses experienced by NHS under that provision," Tom McGraw, Noridian Healthcare Solutions’ chief executive said in a statement Monday to The Forum.
So far, Maryland has not sued Noridian or EngagePoint, so any claims are difficult to assess, Hamm said.
"I don’t have a crystal ball," he said of potential litigation. "My staff, my team, will keep monitoring that."
For his part, Huckle said the focus at Blue Cross Blue Shield will be to continue focusing on increasing efficiency, holding the line on costs and maintaining a healthy margin on insurance operations.
Administrative costs are down about $1.5 million, Huckle said. For every premium dollar, 92.7 cents pays medical and hospital claims, and 8.2 percent goes to administrative costs, with the rest for taxes and reserves, according to company figures.
Last year, for accounting reasons, Blue Cross Blue Shield had to list the value of Noridian Healthcare Solutions as zero. But the firm, which administers Medicare and Medicaid claims, is profitable and employs about 1,800.
"There is value there," Huckle said. Together, Blue Cross Blue Shield and Noridian employ about 2,800, including 2,400 in North Dakota.
During the second quarter, Blue Cross Blue Shield pocketed $22 million through divesting assets as well as a subsidiary. That money, listed last quarter as cash, will help strengthen reserves, Huckle said.