Blue Cross reports 40% rise in profits

March 02, 1995|By John Fairhall | John Fairhall,Sun Staff Writer

Despite shrinking enrollment and revenue, Blue Cross and Blue Shield of Maryland reported yesterday a 40 percent increase in operating profits in 1994, the company's first full year under President and Chief Executive William L. Jews.

Operating profits rose $17.1 million, to $59.9 million, reflecting improved management of medical costs, company officials said. The state's largest health insurer also boosted its surplus -- the amount available to pay any unexpected claims -- to $157.2 million, a 60 percent increase.

Despite a solid increase in the number of subscribers to its five health maintenance organizations, Blue Cross' total enrollment dropped 3 percent, to 1.37 million. Revenue declined 2.4 percent, to $1.9 billion, despite a $78 million increase in HMO revenue.

Corporate Controller Gary C. Baker said the company feels "positively" about the 1994 results and expects to win customers back this year.

"We are confident our enrollment will increase as we move into the future," he said.

He projected enrollment growth of 5 percent to 10 percent for Blue Cross this year, based on rate reductions that went into effect late last year, an expanded physician network and efforts to improve customer service.

Last year's enrollment decrease was disappointing because the company aggressively cut prices as part of a corporate overhaul, which also included the elimination of more than 300 jobs.

Mr. Baker said the price reductions occurred too late to improve overall 1994 results much, although enrollment increased slightly in the fourth quarter.

"I think we're well-positioned from a price, cost structure, management standpoint to grow market share," the Maryland Blues' controller said.

But Blue Cross will have to do very well to keep pace with its biggest managed-care rival in Maryland. Rockville-based Mid Atlantic Medical Services Inc. boosted its enrollment to 1.3 million, an increase of 375,000 in 1994.

Most of Mid Atlantic's subscribers are in Maryland, although it also operates in surrounding states.

Enrollment in Blue Cross' five HMOs -- the business Blue Cross urgently wants to grow -- increased 12.5 percent, to 305,000, as of Dec. 31. Traditional indemnity insurance enrollment fell 6.7 percent, to 1.07 million.

Indemnity insurance and administration of self-insurance plans accounted for $42.2 million in operating profits. HMO operating profits were $17.7 million.

The Blues' net profits, taking into account investment income and payment of federal taxes, were $37.9 million.

Nonmedical expenses, including administrative costs, rose 3 percent, to $162.6 million, Blue Cross and Blue Shield said in its report to state insurance officials.

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