CareFirst says income fell 5.8% in second quarter

Medicare, Medicaid payment cuts blamed

Health insurance

August 14, 1999|By M. William Salganik | M. William Salganik,SUN STAFF

Reflecting losses in its Medicare and Medicaid managed care programs, CareFirst BlueCross BlueShield reported yesterday a 5.8 percent drop in second-quarter income to $20.5 million, compared with $21.7 million a year ago.

Margins from commercial insurance products were "flat to slightly up," said G. Mark Chaney, executive vice president and chief financial officer for CareFirst, which operates the Maryland and District of Columbia Blue Cross Blue Shield plans.

However, Chaney said, rate cuts by Maryland resulted in a negative margin of about 2 percent in Medicaid coverage for the poor, and the Medicare program is operating with a negative margin of about 1 percent.

"Given the continued growth in enrollment we're seeing in both of these programs, it's clear that they are valued by our customers," Chaney said. "It would be a shame if we could no longer offer these options to these members because the payments we receive don't cover our actual costs of providing health care."

CareFirst, the state's largest health insurer, already has moved to reverse the trend in Medicare, announcing last month that, effective Jan. 1, it would no longer offer its Medicare HMO in 17 counties -- the Eastern Shore, Western Maryland and Southern Maryland -- where the federal reimbursement rate is lower than in the metropolitan counties.

And it is seeking approval to begin charging a $50-a-month premium in the counties where the program will continue to operate.

With those changes, Chaney said, CareFirst expects the Medicare HMO to break even or show a slight positive margin next year.

As for Medicaid, he said, CareFirst is awaiting a state decision on rates to go into effect late this year, after an earlier 2.3 percent cut in rates.

Overall, revenue for the three months that ended June 30 was $1.1 billion, up 14.6 percent from $986 million in the year-earlier period.

The revenue gain was offset by $1 billion in medical costs, up 14.9 percent from $888 million in the second quarter of 1998. Chaney said about two-thirds of the rise in revenue and care cost came from a gain in membership to 2.5 million, up 10.7 percent from a year earlier.

Pub Date: 8/14/99

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