Blue Cross Blue Shield profit is $9.5 million Investment income helps earnings climb 21.4%

November 15, 1997|By M. William Salganik | M. William Salganik,SUN STAFF

Buoyed by investment income, Blue Cross Blue Shield of Maryland reported yesterday $9.5 million in profit in the third quarter, up 21.4 percent from $7.8 million in the third quarter last year.

Revenue for the quarter was $550 million, up 10.7 percent from $497 million in 1996. But the $53 million increase in revenue was offset by a $54 million increase in the cost of medical care.

"Our care costs continue to outpace our growth in revenue," said Mark Chaney, senior vice president and chief financial officer. "If it were not for investment income, we would have had essentially flat profits."

With the growth in investment income, the operating margin was 1.7 percent for the quarter and 1.4 percent for the year to date. The goal for the year is 1.5 percent, equal to last year's margin, Chaney said.

That's generally in line with industry results. Publicly traded managed-care plans as a group reported a 1.5 percent margin in the most recent quarter, according to Sherlock Co., which tracks the industry.

Nationally, Blue Cross plans had a margin of 1.5 percent for the second quarter, according to the Blue Cross Blue Shield Association.

Chaney said, "Our HMOs showed significant improvement quarter over quarter, and that's where we have the most control over costs."

As a group, the Blue Cross HMOs -- FreeState, CareFirst, Columbia Medical Plan and Delmarva -- posted $4.3 million in profit for the quarter, in contrast to a $1.9 million loss a year ago.

Profit was down in Blue Cross' traditional indemnity business, from $9.7 million in the third quarter last year to $5.2 million for the three months ended Sept. 30. Blue Cross has 978,000 indemnity policyholders, but that figure is down 3 percent from a year ago as more members shift into HMOs. HMO enrollment is 413,000, up 19.6 percent in a year.

Blue Cross Blue Shield of the National Capital Area, serving the District of Columbia and its Maryland and Virginia suburbs, yesterday reported $8.4 million in profit for the quarter, down 16 percent from $10 million in the third quarter of 1996.

Revenue was $235 million for the quarter and $705 million for the nine months, an increase of 1.7 percent over the corresponding period last year.

Barbara Gracey, a spokeswoman for the D.C. Blue Cross plan, said that its numbers cannot be compared directly with Maryland's because of different accounting requirements in the District.

The Maryland and D.C. plans have proposed combining their operations under a to-be-formed nonprofit holding company. Insurance commissioners in Maryland and the District are lTC expected to decide next month whether to approve the combination.

Pub Date: 11/15/97

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