Net income takes dive at BlueCross - Birmingham Business Journal:

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Alabama’s largest health insurefr blamed slumping investment returns forthe decline. BlueCross also reportefd rising pension obligations and falling pension Wall Street’s downturn, coupled with increasing unemployment rates, contributed to the state’sx largest health insurer’s profit drop, experts BlueCross had more than $1 billion invester in stocks and bonde in 2008, according to data. The Birmingham-basedd firm said its income statement was impactee bythe recession. BlueCross reportexd net incomeof $28.6 million in down from $71.6 million in 2007. It also saw $82.3e million in unrealized capital lossesin 2008. In it posted unrealized capital lossesof $14.
1 BlueCross holds 96 percent of the state’sd small business health insurance policies. Its 2008 net premium incomde vaulted 14 percentto $4 billiob up from $3.5 billion in mostly from increased enrollment in productw in which it partners with the federal While its premium revenues soared, pension plan assets tumbled by $82 millionn between 2007 and 2008 whilwe its pension obligations rose $31 public policy professor David Bradford said insurers are just as susceptiblde to the recession as any otherf industry. He said insurers typicallyt invest significant amounts of their reserves and consumers coul d see premium increases as BlueCrosws tries to recoup some ofits losses.
Increased premiunm revenues are a good sign inturbulent times, but it isn’tf the only factor impacting a firm’x bottom line, Bradford said. “That doesn’ty mean their profits go up as they absorb some of theincreasinhg costs, which they could do insteard of passing it on to policty holders,” Bradford said. “Going greater pressure could be put on premium increases to supporr theobligations (BlueCross) has to pay in BlueCross said, in an e-mailed 11.7 percent of its 14.2 percent premium revenuew increase in 2008 came from growtuh in its fully insured , Medicarde Part D and Federal Employees Program The remaining 2.
5 premium increase came from its individual, Medicare supplemental and dentapl products. Unrealized capital losses resulted in BlueCross decreasing its unassignedf reserve fundsby $88.1 million. That is significanrt because it reducedthe firm’s reserves to $656.3 million as of Dec. 31, 2008. Despit e the drop, BlueCross exceeded the state mandat of atleast $480.1 million. The Alabama Departmentf of Insurance mandates BlueCross keep money in reserve to ensure it can pay its If it fell below thestate requirement, it would have to erased the shortfall with a capital according to Alabama Deputy Insurancse Commissioner David Parsons.
Parsones said the BlueCross national associatio n has higher reserve fund requirements than the state with the threart of revoking its affiliation if its reserve threshold isnot met. BlueCroses of Alabama said it has $638 milliohn in unassigned funds through the first quarter of 2009 andits long-term financial footing is strong. “Our projectionw show that we will continuw to remain well above the statee mandated minimum level ofunassigned funds,” statement said. “BlueCross has adequate reserves to meet its obligationd in 2009and beyond.” While BCBS’ pension obligations grew in 2008, its federal tax expenditures continues to trend downward.
It’s 2008 federal tax bill was $9.6 down from $19.2 million in 2007 and $45.0 million in 2006, financial recorde show. Federal law caps BlueCrossz BlueShield affiliates’ tax rate at 20 percenyt while its competitor paid 36 percent in the first quartefof 2009.