Md. Blues' earnings rose 5.6% HMO profits helped quarterly results

May 18, 1993|By Patricia Meisol | Patricia Meisol,Staff Writer

Blue Cross and Blue Shield of Maryland said yesterday that it earned $9.4 million for the period that ended March 31, up 5.6 percent from the same time last year, thanks partly to continued profits from its health maintenance organizations.

The state's largest health insurer, which reported a 7.9 percent increase in revenues, said, however, that its managed-care companies lost 5,000 members in the first quarter of 1993 as competitors moved into the state.

The company's strategy has been to acquire and build a managed-care organization. Enrollment dropped 6 percent, or 16,000 members, last year, partly because of organizational changes.

But the Blues reported a year-end profit of $11.7 million on these products and profits continued in the first quarter.

The HMOs -- Columbia Medical Plan Inc., Healthcare Corp. of the Mid-Atlantic (known as CareFirst), Healthcare Corp. of the Potomac and Free State Health Plan Inc. -- earned $2.8 million, up 86.6 percent from the same period last year. Revenues rose slightly, to $97.2 million.

James R. Swenson, chief financial officer for Blue Cross, said the earnings reflected a continued attempt to cut HMO administrative expenses and keep price increases below the market average. The Blues HMOs enroll 245,000 people.

Overall, income from the Blues' base insurance business was $6.4 million, an 11 percent drop from the same period last year. Mr. Swenson said profits would have been higher than last year's except for a $1.5 million charge for the recognition of post-retirement benefit obligations.

"We are pleased with the earnings," Mr. Swenson said. He said, however, that the company continued to lose money on its administrative business at about the same level as last year. The company lost $1.25 million on this business, which administers insurance programs for other companies, an amount that he called "unacceptable."

The company's net worth rose to $29.5 million, up $4.5 million. The full amount of earnings was not added to reserves, however, because Blue Cross was required to reduce the value of an asset, CareFirst, to comply with accounting rules.

The insurer's net worth is expected to rise considerably next quarter when the sale of two subsidiaries last month is recorded.

Blue Cross is on a four-year plan to rebuild its reserves to more than $50 million to meet minimum levels sought by state insurance regulators. The insurer's net worth dropped 75 percent, to $25 million, at year-end.

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