Insurer: BCBS grapples with loss

FARGO -- North Dakota's largest private health insurer is warning that a looming loss that could top $20 million might force Blue Cross Blue Shield of North Dakota to trim reimbursements to medical providers.

FARGO -- North Dakota's largest private health insurer is warning that a looming loss that could top $20 million might force Blue Cross Blue Shield of North Dakota to trim reimbursements to medical providers.

Any cuts would come during a time when hospitals and health systems are strained financially, struggling with chronically lagging Medicare reimbursements.

Mike Unhjem, the Blues' CEO, said the health insurer is striving to increase efficiencies to avoid trimming reimbursements, but is facing an operating loss now estimated at about $22 million for its current fiscal year, which ends Dec. 31.

The deficit, called an underwriting loss, is the difference between premiums collected and claims expenses paid. Insurance companies have other sources of income, primarily from investments, which keep the firm in the black financially.

Blue Cross Blue Shield executives met Wednesday with representatives of the state's "Big Four" health systems - MeritCare in Fargo, Altru in Grand Forks, as well as Medcenter One and St. Alexius in Bismarck - and addressed the mutual financial squeeze confronting insurers and providers.


"The margins are such that maintaining the quality of care that we have in North Dakota may be at a turning point," Unhjem said. The Blues, facing claims rising faster than projected, had budgeted for an underwriting loss of $15 million.

The strains come at a time of rising medical inflation. Blue Cross Blue Shield of North Dakota budgeted for health-care inflation of 9.5 percent, but costs have been rising by more than 11 percent over the past year, he said. Last year, the Blues' requested a 17.3 percent increase in premiums for individuals, but got permission to boost those premiums 9.9 percent for the fully insured group rate.

"It's not a crisis," Unhjem said of the insurers' projected losses from premiums minus claims. "But it's serious."

Denise Kolpack, the North Dakota Blues' vice president of communications, stressed that numbers are preliminary, and said no decisions have been made.

"We're doing due diligence to analyze all of that," she said Thursday. "We're being prudent and taking this seriously. It's premature to know exactly the numbers. We don't know yet what our steps will be."

Meanwhile, the state's leading health systems are struggling financially and as a group the "Big Four" are hoping to break even this year, but could end up with deficits, Unhjem said. Cuts in reimbursements would exacerbate providers' financial woes and could force cuts in services.

"That was the message that we got loud and clear," Unhjem said.

North Dakota health providers have complained for years that they are penalized by Medicare, the federal health insurance program for the elderly, because their efficiencies mean lower payments than other regions of the country.


That gap in reimbursements, dating back 25 years, has compounded over time, Unhjem said. The result translates into financial pressures that keep deepening over time.

"I would say the magnitude of it we've not seen before," he said of the current cost squeeze.

MeritCare recently told it's employees that the health system is striving to boost efficiency by 30 percent over the next year to cope with reimbursements that fail to keep pace with rising costs, even as patient admissions continue to grow by 8 percent to 9 percent a year.

"We're waiting to see what happens," MeritCare spokeswoman Carrie Haug said Wednesday. Until then, the health system has no comment.

Administrators at St. Alexius Hospital in Bismarck also have adopted a wait-and-see attitude, but a spokeswoman said any reduction in reimbursement would be a concern.

"Blue Cross is a good payer," said Nancy Willis, St. Alexius' vice president of governmental relations and marketing. St. Alexius expects to end its fiscal year June 30 in the black, she said.

Jim Cooper, president and CEO of Medcenter One, said it is "premature" to determine how a reimbursement cut from Blue Cross Blue Shield might affect North Dakota hospitals.

Last year, however, Medicare cuts meant a $1.5 million funding cut for the hospital, forcing economy moves that included eliminating its parish nurse program.


Dave Molmen, CEO of Altru, said North Dakota health providers embraced integrated health systems early, helping to improve quality of care and efficiency. But reimbursements that don't cover costs are a chronic problem.

"We experience very low funding on all fronts," he said.

The Forum and The Dickinson Press are both owned by Forum Communications Co.

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