Not-for-profit Blue Cross Blue Shield plans felt the pinch in 2008, with capital levels hammered by falling investment income, writes Carl McDonald of Oppenheimer. The result: BCBS plans are raising prices. Notes McDonald:
“With capital at the Blues having fallen to levels last seen in 2003/2004, pricing has firmed, creating a floor on pricing in many markets for the publicly traded commercial plans.
“There is ample evidence that the Blues are raising prices by more in 2009, but the full impact of the significant equity market decline probably wasn’t recognized in January 1 renewals, since many plans had released rates before the market got really bad in the fourth quarter. This means that pricing will likely strengthen over the course of the year….
“Underwriting margins for the Blues were stable in 2008, at 1.3%, as the medical loss ratio for the Blues deteriorated just 30 basis points, to 86.7%. Risk enrollment at the Blues fell by about 1 million lives in 2008, by our estimate. The excess capital held by the Blues fell by $4.5 billion, a drop of almost 20%….
“In total, our analysis tracks 33 non-profit Blues that generated $135 billion in revenue in 2008, and covered a total of 44.3 million risk lives.”
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