Md. Blues' earnings rose 426%

August 16, 1994|By Patricia Meisol | Patricia Meisol,Sun Staff Writer

Blue Cross and Blue Shield of Maryland Inc. reported profits of $15.8 million for the quarter ended June 30, an increase of 426 percent from the same period last year.

The jump in earnings, however, was overshadowed by a reported 1.6 percent drop in the insurer's revenues during the second quarter as some subscribers moved their business elsewhere.

The company, the state's largest health insurer, had planned for 6.5 percent in revenue growth, said Gary C. Baker, the company's controller.

Like other insurers, the Blues, which insure or administer insurance for 1.4 million Marylanders, have been in the midst of a changing health care market as consumers shift away from traditional insurance and into managed care programs, such as health maintenance organizations.

In the latest three months, the Maryland Blues reported a 2 percent growth in membership in its HMOs. That was not enough, however, to offset the number of customers leaving its traditional insurance programs.

In the first half of 1994, for example, Blue Cross lost thousands of members to competitors when large employers, which had signed up with Blues plans in other states but whose local employees are serviced by the Maryland Blues, moved to new insurers.

For example, AT&T Corp., dropped its pact with the Empire State Blue Plan in New York, a move that affected several thousand retirees in Maryland. The company also lost 6,000 members when Maryland National Bank was purchased by NationsBank and the new parent switched to CIGNA.

The insurer's increased profits came primarily because of improved ratios of medical claims to revenues and a 5 percent drop in expenses.

"We've had a strong financial performance for the first half of the year," Mr. Baker said. "The idea is to increase service levels and use our broad access to do the right thing price-wise and get the enrollment base we want to increase revenues for 1994 and into 1995."

The Blues' long-term plan is to move subscribers from traditional insurance programs into its managed care products. The insurer's five HMOs earned $4.5 million on revenues of $117 million in the quarter. Revenues at the HMOs were up 2.5 percent compared with the same period last year.

Also in the most-recent quarter, the insurer earned $1.5 million administering health insurance plans for other companies, compared with losses of $3 million in its first quarter ended March 31. The company is on track for the business to become profitable by year end, Mr. Baker said.

Expenses for the full company in the quarter were 10.9 percent of revenues, higher than expected and the result of a decline in revenues, Mr. Baker said. But the insurer's statement showed the company paid out fewer claims in the first six months of 1994 than in the same period last year.

For the six months ended June 30, the insurer earned $31 million on revenues of $707.6 million.

Its reserve, or pool of funds for unanticipated claims, has grown to $130 million from $98.1 million on Dec. 30, 1993.

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