Membership gains and strong investment earnings highlight Blue Cross Blue Shield of Michigan financial report for 2012

Health insurance underwriting losses offset by investment performance

March 1, 2013

DETROIT — In financial reports filed today with state regulators, Blue Cross Blue Shield of Michigan reported a relatively small, $2.5 million net income loss for 2012 on a statutory accounting (SAP) basis, driven by underwriting losses of $221 million that are primarily attributable to insurance plans for individuals. The insurance losses were mostly offset by strong investment performance, continued membership and revenue growth, and the company’s focus on initiatives to improve the quality and efficiency of health care by working in partnership with doctors and hospitals.

"Our objective as a nonprofit company is to manage our margins on health insurance to very low levels of either gain or loss. This keeps insurance costs more affordable for Michigan consumers," said Daniel J. Loepp, BCBSM president and CEO. "The results filed with our regulators indicate strong performance in membership, investment returns, and progress toward improving health care quality and cost. These efforts help Blue Cross sustain strong financial performance, which minimizes impact on health insurance ratepayers."

In 2012, BCBSM’s statewide average premium increase for small group customers was lower than in previous years. The company also posted its second straight year of membership growth—an increase of 32,336 Michigan members to a total of 4,446,956 in 2012, thanks in large measure to moderated rate increases and continued growth in new products.

"In an atmosphere of significant change, we continue to see a positive response from customers to our efforts to provide more choices in health insurance products and more cost-competitive pricing," Loepp said.

Investment performance is strong, offsetting insurance losses and taxes

  • BCBSM once again outperformed national benchmarks when managing its investments, achieving rates of return averaging just over 7 percent. Net investment earnings on a SAP basis in 2012 were $252.8 million, which included net investment income of $158.1 million and net realized capital gains of $94.7 million. BCBSM also paid $34 million in federal taxes in 2012.

Reserves stable as Risk Based Capital regains points lost in 2011

  • BCBSM’s Risk Based Capital (RBC), a measure of BCBSM’s and the insurance industry’s financial stability used by the National Association of Insurance Commissioners, regained some strength. It increased by 38 points over the past year—to 711 percent RBC in 2012—after losing 25 points in 2011. One driver was strong investment returns.

Underwriting losses remain on individual plans

  • BCBSM experienced a health insurance underwriting loss of $221 million on a SAP basis in 2012, compared to a $48.8 million loss in 2011. The loss was driven by BCBSM’s individual segment, which accounts for about 9 percent of its membership.

GAAP revenue and claims expenses

  • Under Generally Accepted Accounting Principles (GAAP), a consolidated measure that includes BCBSM and its subsidiary companies, BCBSM revenues totaled $20.9 billion for 2012, up from $20.4 billion in 2011. BCBSM and its subsidiary companies paid $18.6 billion to fund benefits on behalf of customers and members. BCBSM will report complete and audited GAAP financial results in its annual report, to be made public in April 2013.

Successful products win customers

  • BCBSM experienced membership growth for the second year in a row. BCBSM gained 32,336 Michigan members in 2012, driven by new business growth in the small group market and higher retention of existing business. Total combined Michigan membership of BCBSM and BCN went from 4,414,620 in 2011 to 4,446,956 Michigan members in 2012. 
  • BCBSM’s Simply Blue℠ product continues to attract the strongest membership gain in a new product since the launch of Community Blue PPO℠.

Collaborative work with doctors and hospitals

  • BCBSM attributes its success in helping hold down costs to collaborative work with doctors and hospitals. BCBSM’s Value Partnerships initiatives, which seek to improve health care quality while reducing waste and errors, continued expanding in 2012 and producing outcomes in the management of treatment for chronic conditions.
  • In particular, BCBSM’s Patient-Centered Medical Home Program nearly tripled the number of physicians participating in the program since 2009 to 3,017 physicians in 2012. The program is the largest of its kind in the nation for the fourth consecutive year. Data announced in 2012 showed PCMH-designated practices have patients who require fewer hospital admissions and emergency room visits than patients in non-designated practices.


Blue Cross Blue Shield of Michigan and Blue Care Network are nonprofit corporations and independent licensees of the Blue Cross and Blue Shield Association. For more news and information go to

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