Blue Cross grows some, sees a slight rise in profits Competitive premiums beget modest earnings

November 16, 1996|By Jay Hancock | Jay Hancock,SUN STAFF

Blue Cross Blue Shield of Maryland, the state's biggest health insurer, got a little bigger during the summer quarter but booked a profit that was only slightly higher than in the same period last year.

In July enrollments, the second-most important sign-up period of the year for medical insurers, Blue Cross recorded a net membership increase of 15,000, bringing its total to 1.36 million members, the Owings Mills-based company said yesterday in filings with the Maryland Insurance Administration.

Blue Cross, which has struggled to keep members from defecting to rival insurers in recent years, has added 27,000 members this year and more than 40,000 since 1994, said Controller Gary C. Baker. The company has about 40 percent of the insurance market, he said.

But it has paid the price for enrollment growth with more modest profits. Competitive premium rates that helped add business during the quarter also affected the bottom line, Baker said.

"In the past two to three years, we've been saying that in this marketplace we need to be as or more competitive than the environment," he said.

Blue Cross earned $7.8 million for the three months ending Sept. 30, only a 2 percent increase over the same period last year. Revenue grew more, by 8.5 percent, to $497 million.

The company's profits were also hurt during the quarter by unexpectedly high hospital and drug costs. Managers have been trying to control those costs without harming care, and those efforts "are just beginning to have an effect," Blue Cross said in a prepared statement.

Still, Blue Cross executives expressed satisfaction that the company is making money and building membership simultaneously, a feat that seemed difficult for it not long ago.

"This continues to be a dynamic market which is intensely competitive, and I am pleased that we continue to improve our position," said William L. Jews, Blue Cross' president and chief executive officer. "The increase in profits for the quarter, while slight, demonstrates that our current efforts are appropriate in this marketplace."

The company has no plans to boost profitability by cranking up prices next year, Baker said. "There is nothing anticipated where there are wholesale rate increases," he said.

Much of Blue Cross' enrollment increase for the quarter came from its Medi-CareFirst program for senior citizens and from its small-group division.

For the nine months ended in September, Blue Cross revenues rose to $1.5 billion, a $60 million increase over the same period last year. It has earned $22 million so far this year and boosted its "statutory surplus," a cushion for paying unexpected claims, by 11 percent to $219.5 million.

Pub Date: 11/16/96

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