Nonprofit CareFirst nets $171.3 million

64% rise in '03 sparks call for more public benefits

February 28, 2004|By M. William Salganik | M. William Salganik,SUN STAFF

CareFirst BlueCross BlueShield yesterday posted $171.3 million in net income for 2003 - up 64 percent from the $104.4 million reported in 2002.

The company said its fatter margin would allow it to hold the line on premiums in some of its health insurance lines.

The chairman of the health committee in the state House of Delegates, however, said lawmakers will be looking for nonprofit CareFirst to put more of its growing earnings into public benefits. If it doesn't present a plan to do that, CareFirst could see key legislation stalled.

The increase in earnings "means there's a sizable amount of money that should be pouring into funding ways to cover the uninsured and the poor," said Del. John Adams Hurson, a Montgomery County Democrat and chairman of the House Health and Government Operations Committee.

"They need to show us a plan," Hurson continued. "We've been asking them for their approach to their nonprofit mission. We've gotten a lot of brochures, but I don't know that we've gotten a plan."

CareFirst, the largest health insurer in the state, proposed in 2001 to convert to for-profit operation and sell the company for $1.3 billion.

When Maryland regulators blocked the deal last year, legislators responded with a reform package, locking CareFirst's nonprofit mission into law and forcing out the Maryland members of CareFirst's board.

CareFirst is seeking some modifications in that legislation to placate insurance regulators in the District of Columbia and Delaware, who are concerned about the impact of the Maryland reforms on CareFirst members in their jurisdictions.

"Before we consider any requests they have," Hurson said of CareFirst, "we want to see their plan."

CareFirst officials were not available for comment yesterday.

In a statement announcing its earnings, CareFirst said it would not increase premiums for 67,000 members with Medigap policies that supplement Medicare in Maryland and Delaware, and for 56,000 members covered by small-employer policies in the Washington area.

Revenue for 2003 was $7.3 billion, an increase of 9 percent over revenue of $6.7 billion in 2002.

Most of that increase came from higher premiums; membership was up only about 1 percent to just under 3.3 million.

Explaining the improved operating margin, G. Mark Chaney, CareFirst's chief financial officer, said in the statement, "While health care spending continued to rise last year, it rose at a slower rate than we had anticipated when we were setting our 2003 premiums."

CareFirst did not release detailed companywide financial information, but did file financial reports with the Maryland Insurance Administration for three subsidiaries operating in the state that cover about half of CareFirst's members.

Those filings show CareFirst collecting $219 per member per month in premiums - up 10.4 percent from the previous year - and spending $186 in medical costs - up only 7.5 percent.

The trend is consistent with those throughout the industry, said Douglas B. Sherlock, a senior analyst with Sherlock Co., a health data and consulting firm in Gwynedd, Pa. Publicly traded commercial health insurers saw earnings rise about 50 percent in 2003 over 2002.

"They were able to raise prices a lot more than was normal in the 1990s," Sherlock said, "and many had lower-than-expected trend" in health costs.

With the industry more profitable, Sherlock said, premium increases - in double digits for the past several years - are likely to moderate.

Public companies giving financial guidance are generally projecting premium increases over the next year of 9 percent to 10 percent, he said.

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