Report: BCBS companies hit hard in 2009

Blue Cross Blue Shield companies experienced both a decline in underwriting earnings and lower premiums in 2009, according to a report by the credit rating firm A.M. Best.

Investment income also declined for BCBS plans because interest rates remained low, the report said.

The Oldwick, N.J.-based firm said the turnaround in the financial markets resulted in realized and unrealized gains in 2009, compared with losses the prior year.

Overall, net income for BCBS plans improved mostly due to realized gains rather than investment or underwriting income, while total capital & surplus also grew largely due to unrealized gains on investments.

Other information in the report included:

• Underwriting earnings dropped in total for the aggregated group of Blue Cross Blue Shield plans by 40.7 percent to $2.6 billion, or $48 million on average, a significantly larger drop in earnings than 2008's 6 percent decrease;
• The healthcare expense ratio for the aggregated group in 2009 increased by 70 bps from 85.9 percent to 86.6 percent. The SG&A expense ratio for the aggregated group in 2009 had a 50 percent bps increase to 11.3 percent;
• Net premiums written grew by 2.7 percent in 2009 to $153.4 billion. The low rate of growth in 2009 versus 6.9 percent in 2008 reflects rate increases offset by the impact of membership losses and benefit buydowns in the commercial sector;
• There was a 7.8 percent decrease in investment income to $44 million on average due to the low interest rate environment;
• C&S grew by 10.9 percent in 2009 to $46.3 billion in aggregate due to improved net income and unrealized gains.