| CareFirst says profit rose 4.4% in 2004 to $178.8 million; revenue up 8% |
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| The Baltimore Sun |
| M. William Salganik |
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CareFirst BlueCross BlueShield - which has already promised to become less profitable to boost its nonprofit mission - posted $178.8 million in net income in 2004, according to filings with insurance regulators.
The number isn't a surprise. CareFirst officials told legislators at a January briefing that the bottom line would be about $175 million. It's slightly higher (4.4 percent) than the $171.3 million in net income CareFirst recorded in 2003.
Revenue, almost all from premiums and administrative fees, was $4.7 billion, up about 8 percent from the previous year. The insurer paid out about $4 billion in medical bills, up about 9 percent from the previous year.
Despite the higher earnings, CareFirst's margin - earnings as a percentage of revenue - is lower than that of its for-profit competitors. CareFirst's margin was 3.8 percent for the year. The average for commercial plans is 6.9 percent, according to Sherlock Co., a financial advisory company that publishes newsletters on industry performance. The largest for-profit Blue Cross plan, WellPoint Inc. of Indianapolis, reported a margin of 4.7 percent for 2004.
The profitable year allowed CareFirst to add to its surplus, which is comfortably larger than required by regulators. CareFirst recorded $1.1 billion in surplus at year's end, not counting its Delaware plan - up 18 percent from a year earlier.
Legislators and advocates have complained over the past few years - since CareFirst tried to convert to for-profit operation and sell itself for $1.3 billion, a deal that was blocked by regulators - that CareFirst, the largest health insurer in the state, was making too much money and not fulfilling its mission as a nonprofit.
In response to the criticism, the Owings Mills-based company unveiled what it said was a $90 million plan called CareFirst Commitment. As part of the plan, it cut its profit target for 2005 by $60 million so it could hold down premium increases. It said it would spend $8.7 million this year to improve patient safety and reduce health disparities among ethnic groups.
"We will not be driven by the bottom line to the extent the company was previously," Michael R. Merson, chairman of CareFirst's board, told lawmakers in January.
Then, in February, CareFirst said it would not pass along to consumers a new HMO tax, passed in January to help doctors pay for malpractice insurance. Instead, CareFirst will absorb the cost, estimated at $13.7 million after taxes.
The company also has commissioned an actuarial study of whether it has more surplus than it needs.
Membership at the end of the year was 3.3 billion, up slightly from 3.2 billion a year earlier. CareFirst operates Blue Cross and Blue Shield plans serving Maryland, the District of Columbia and Delaware.
The $178.8 million in earnings for 2004 did not include a noncash loss of $82 million associated with CareFirst's divestiture of Patuxent Medical Group, a 47-doctor group based in Howard County. |
