(Legal Monitor Worldwide Via Acquire Media NewsEdge) Blue Cross and Blue Shield of North Carolina's profit grew by about 60 percent to $92.6 million in 2013 compared with the prior year, and it bumped up the pay of 10 of its top executives in the year. The total pay for CEO Brad Wilson, including salary and bonus, grew 20 percent to more than $2.9 million.
And while the company reported profit and revenues increased in the year, it also saw larger claims and medical expenses. Revenue was up about 10 percent in the year to $6.4 billion – helped by a reported increase in premium revenue of about $600 million and a $40 million increase in investment income. Medical and claims expenses grew about 11 percent to $5 billion.
In the end, the company said it spent about the same last year as it did in the prior year on medical expenses per premium dollar, at a rate of 85.9 cents spent on care per dollar of premium received. Its profit margin, the amount of profit as compared to total revenues, was 1.4 percent in 2013, up from 1 percent in 2012.
Lew Borman, a spokesman for the insurer, said in an email that he would classify the insurer's profit level as "thin."
"In a challenging year for the health care industry, our company provided value for our customers by investing in technology and bringing new products and services to the market to meet our increasingly diverse customers' health care needs," Blue Cross' president and CEO Brad Wilson said in a news release. "In addition, our network discounts with doctors and hospitals saved them over $5.7 billion on health care expenses."
Company officials reported that 2013 was a big year of change as employees worked to implement key aspects of the federal health care law known as "Obamacare" and known officially as the Patient Protection and Affordable Care Act. Gerald Petkau, chief financial officer and senior vice president, indicated, however, the roll-out of the law had less impact than in last year's financials.
That's because open enrollment started Oct. 1 last year in the online health insurance exchange rolled out through the health care law, but Petkau said plans really take effect Jan. 1 of this year. So Petkau indicated the insurer expects to see larger revenue growth in 2014 as it signs up new members and sees growth in premium dollar revenues.
However, he cautioned that he didn't want to overstate the impact of the individual sign-ups from the health care website on business, as the insurer's 3.84 million-person customer base included fewer than 400,000 individual members under the age of 65. He also said it's premature to say how the law will impact the insurer's bottom line. That's because open enrollment in the online health exchanges doesn't end until March 31, and he said insurance leaders don't have good historical claims and health level data yet for the patients who have signed up so far on the exchanges.
"It's really premature to make any substantive comment on what (we'd) expect given (we) don't have a great perspective on who will end up signing up by March 31, and what their claims experience and historical claims and health levels have been," Petkau said. "I would say we're comfortable moving forward. We know there's a lot of uncertainty. We are in a relatively strong capital position."
Petkau said the insurer did see an impact in 2013 from expenses on infrastructure investments, some related to the federal health law. Petkau said the company saw an increase of $65 million for a total of $220 million in expenses in the year on major systems projects, including costs related to a new core operating system that he said can handle plans related to the health law, and expanding the insurer's network capacity. He said that while it's difficult to break out exactly how those expenses related to the health care law, a "large portion" were in preparation for it.
Regarding the executive compensation in 2013, Petkau said that the pay is related to cost comparisons at comparably sized companies and industries. He said bonus pay is also determined by a variety of metrics including company financial performance, and customer satisfaction.
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