CareFirst earnings rose 14% in 3Q

Nonprofit's revenue climbs to $1.3 billion

November 18, 2006|By M. William Salganik | M. William Salganik,Sun reporter

CareFirst BlueCross BlueShield posted $38.2 million in income in the quarter that ended Sept. 30, about 14 percent more than the $33.5 million earned in the third quarter of 2005, according to reports filed by the insurer with the Maryland Insurance Administration.

For the first three quarters of the year, it earned $108.6 million, compared with $91 million in the corresponding period last year.

Most of that difference, however, is accounted for by $12.5 million in one-time payments CareFirst received in the first quarter. The payments came from settlements of old financial questions, most over the application of discounts for CareFirst's program for federal employees.

"Care costs have moderated from last year, and last year was down from the year before," contributing to the modest increase in profitability, said Jeffery W. Valentine, a CareFirst spokesman.

"To a large extent," Valentine continued, "we are seeing the positive impacts of our emphasis on care management, disease management and wellness promotion," programs designed to hold down costs by keeping members healthier.

CareFirst also benefited from a reduction in reimbursement rates to some providers that took effect July 1, and from a phase-in of this year's premium increases.

Last year, CareFirst held the line or took smaller increases in some product lines, saying it had decided to reduce profits as part of its nonprofit mission.

CareFirst had been criticized as acting too much like its for-profit competitors. The insurer had sought to convert to a for-profit company as part of a deal to sell itself, but regulators blocked the effort in 2003.

Now, Valentine said, CareFirst's profit margins are "in the 2 to 3 percent range - far lower than our for-profit competitors." Commercial health insurers had an average profit margin of 7.2 percent, according to Pulse, an industry newsletter.

Although a nonprofit, CareFirst uses operating income for capital projects and for reserves against future claims.

Revenue for the third quarter was $1.3 billion, up from $1.25 billion.

CareFirst paid out 86.4 cents in claims for each dollar in premiums, up from 86 cents last year, a figure known as "medical-loss ratio" or "health-benefit ratio."

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