CareFirst enrollment, operating earnings up

Profit margin grew only slightly, held down by higher care, drug costs

May 18, 1999|By Shanon D. Murray | Shanon D. Murray,SUN STAFF

CareFirst BlueCross Blue-Shield experienced dramatic enrollment gains in the first quarter, but rising health care and prescription drug costs have held back profit-margin growth, the company said yesterday.

Owings Mills-based CareFirst, which operates the Maryland and District of Columbia Blues plans, posted a $16.9 million operating profit for the first quarter, which ended March 31.

That was up 22 percent from $13.9 million in the first quarter of 1998. Revenue in the quarter was $1.08 billion, up 14 percent from $946 million in last year's first quarter.

"We think it was a very solid first quarter. We're especially pleased with the 70,000 new contracts we have," said G. Mark Chaney, executive vice president and chief financial officer of CareFirst. "That's an indication that we're giving customers a good product with a good price."

But, Chaney expressed dissatisfaction with the company's profit margin of 1.56 percent, compared with 1.47 percent for the prior year-to-date.

"We don't have a whole lot of excess in the margin to account for increases, and that concerns us," he said, adding that Maryland's hospital costs are 8 percent above the national average this year.

There also have been double-digit increases in the cost of prescription medications, he said.

"This is a trend that has not abated," Chaney said. "We're applying our best efforts to manage costs."

To do that, CareFirst has focused on trimming its administrative costs, which dropped from 9.6 percent of revenue to 9 percent this quarter, he said.

In addition, CareFirst suffered continued losses in its Medicare HMO plan, called Medi-CareFirst. The plan's enrollment grew by 17,000 patients, and the company began a monthly premium, but it remains unprofitable, Chaney said.

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