Blue Cross profits rose 8% for year

March 02, 1994|By Patricia Meisol | Patricia Meisol,Sun Staff Writer

The state's largest health insurer, Blue Cross and Blue Shield of Maryland, reported yesterday that overall earnings rose 8 percent last year to $79.8 million, thanks partly to the sale of a portion of its business.

Last year's results came during a difficult year, which brought a change in leadership and a restructuring of business operations in the wake of a U.S. Senate probe that concluded the company was grossly mismanaged.

Blue Cross' financial results indicate it has shaved expenses and increased return on revenues. Overall revenues rose 2.6 percent to $1.95 billion.

The company's results helped boost Blue Cross' reserve, the cushion against unexpected medical claims, to $98.2 million.

"We believe that our fiscal performance tracks with our new strategic direction," said William L. Jews, president and chief executive of Blue Cross. "The company's ability to serve our customers and effectively manage and price our product portfolio is greatly enhanced through meeting financial goals."

The company, however, remains in an uphill battle to increase market share of its health maintenance organizations. The managed-care business, including the company's HMOs, is considered a vital part of the Blues' future. With revenues and profits from its traditional indemnity business flat or declining, the HMO business accounted for about one-third of Blue Cross' profit, excluding one-time items. Blue Cross insures or administers health insurance for 1.4 million Marylanders.

Overall, net income in the company's basic business -- including income earned on investments and from the sale of two subsidiaries -- rose 75 percent to a record $71.4 million. The company sold Green Spring Health Services Inc., its national mental health management firm, in May for about $37 million and a second company, Paradigm Pharmacy Management Inc., for about $15 million in December.

Operating profits rose 1.8 percent to $30 million. Those results, though, included a one-time gain of $7 million because of accounting changes in the way the company records employees' vacation time. Excluding the accounting change, operating profits would have been 28 percent below last year.

The HMOs had combined revenues of $416 million for the year, up from $400 million in 1992. Profits for the five companies rose 28.6 percent to $15.7 million. Blue Cross-owned HMOs do business under the names of CareFirst, Free State, and Potomac health plans; Columbia Medical Plan, and Delmarva Health Plan.

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