Blue Cross RI posts $40M profit for first 9 months of the year

Blue Cross & Blue Shield of Rhode Island's headquarters in Providence.

PROVIDENCE, R.I. (WPRI) – Blue Cross & Blue Shield of Rhode Island continues to experience a turnaround following three money-losing years in a row, but executives at the state’s largest health insurer say they still see challenges ahead.

In a regulatory filing, Blue Cross said its net income was $40.2 million through Sept. 30, a big swing from the net loss of $45.8 million the insurer was running at the same point last year. (In the end the insurer lost $35 million for all of 2016.) Revenue was up slightly, as well, to $1.29 billion.

The insurer’s net reserves – a key measure of its solvency – stood at $303 million on Sept. 30, up from $245 million at the same point last year. Its insurance underwriting was also in the black by $29.5 million.

Blue Cross spokeswoman Gail Carvelli said about half the $40 million profit was due to one-time events, but she attributed the rest to efforts undertaken by management since last year’s loss. She said its new contract with pharmacy-benefit manager Prime Therapeutics is increasing use of generic drugs and moderating cost increases.

“Through September, BCBSRI is also experiencing lower-than-expected medical claims because members are not seeking services at the same rate as in 2016,” Carvelli told Eyewitness News. “Specifically, our members had fewer joint replacements, less use of the neonatal intensive care unit and other high-cost services.”

However, Carvelli warned that Blue Cross does not expect the trend to continue in the final three months of 2017, citing the Trump administration’s decision to eliminate an insurance subsidy program. Both Blue Cross and its rival, Neighborhood Health Plan of Rhode Island, have agreed to continue the subsidies through the end of the year at an estimated cost to them of $4.5 million.

Neighborhood continues to operate on a thin profit margin, with the fast-growing insurer reporting net income of just $1.2 million on about $1 billion in revenue through Sept. 30. But Neighborhood President and CEO Peter Marino said he was satisfied with its performance for the first nine months of the year.

“Neighborhood’s financials are strong, and just where we thought they would be,” Marino said. “Through September 30th, our financial picture is exactly in line with our forecasts and reflects our ongoing commitment to being responsible stewards of taxpayer dollars. Neighborhood continues to meet its financial goals.”

Marino also noted that Neighborhood’s net reserves totaled $102.9 million, up by about $1.4 million from a year earlier, “even in the face of a year full of volatility and uncertainty throughout the health insurance industry.”

A third insurer that operates in Rhode Island, UnitedHealthcare of New England, reported net income of $23.4 million on $733 million in revenue through Sept. 30.

Ted Nesi (tnesi@wpri.com) covers politics and the economy for WPRI.com. He writes Nesi’s Notes on Saturdays and hosts Executive Suite. Follow him on Twitter and Facebook

Susan Campbell contributed to this report.