Blues post first income gain in 3 years

March 1, 2018 GMT

Blue Cross Blue Shield of Michigan experienced positive health insurance underwriting results for the first time in three years in 2017, according to year-end results announced Thursday.

Michigan’s largest health insurer expects to post a positive operating margin of $385 million on revenue of $26.9 billion, company officials said in a call with the media.

The positive operating margin of 1.4 percent was driven in large part by improvements in the company’s Medicare Supplement business, also called Legacy Medigap, company officials said.

The Detroit-based Blues increased membership for the seventh consecutive year, adding 54,862 customers across all of its products — which include in Blue Cross Blue Shield of Michigan health plans, Blue Care Network of Michigan health maintenance plans and Blue Cross Complete of Michigan. Year-end membership included 5.4 million people nationally, with 4.62 million in Michigan.


Blue Cross President and CEO Daniel Loepp’s salary remained the same for the fourth straight year at $1,537,661. His bonuses -- a combination of annual and long-term incentive payments -- totaled $10.38 million, an increase of $2.08 million over 2016.

Loepp’s benefits package was valued at $1.5 million.

“Across the board, 2017 was a very strong year for our business,” Loepp said in a press release. “Achieving membership gains speaks to the efforts we’ve made as a company to improve our customers’ experience and provide health insurance products that improve our members’ lives.

“We are keeping margins on health insurance low, but profitable,” Loepp said. “We saw a significant increase in small employer membership in 2017, resulting from our efforts to moderate prices for small businesses. And we are diversifying our revenue streams, growing business outside of health insurance and maximizing returns from investments, to keep health coverage affordable.”

For the first time in five years, the Blues put into effect in January 2017 new prices for Legacy Medigap plans that were authorized by Michigan regulators. The move brought prices closer to the rates charged by other companies, officials said.

Blue Cross still loses money on Legacy Medigap overall, but the shortfalls are significantly less than the more than $200-million-a-year losses the insurance giant averaged since 2006.

Another key factor in improving the financial results was strong profitability from subsidiary companies within the Blues’ Emerging Markets division, which include the Lansing-based Accident Fund Group.