Blue Cross Blue Shield of Michigan’s 2013 financial report shows solid investment earnings and successful management during time of change

March 3, 2014

DETROIT — Blue Cross Blue Shield of Michigan will report consolidated net income of about $265 million for 2013, increases in health insurance membership and stable reserves ensuring continued financial strength and stability for its members during a time of volatile change in health care. Consolidated revenue totaled $21.3 billion. The results, reported under Generally Accepted Accounting Principles (GAAP), will be published April 2014 in BCBSM’s annual report.

Despite many changes underway in Michigan’s health insurance market, BCBSM posted its third straight year of membership growth—an increase of 3,283 Michigan members to a total of 4,450,239 in 2013 for BCBSM and Blue Care Network combined.

Careful management of its investment portfolio and strong performance by its subsidiaries, including Blue Care Network, helped BCBSM offset an underwriting loss of $117 million for 2013. Investment income totaled $417 million on a consolidated basis and Blue Care Network posted a positive net income of $120.2 million on GAAP basis for 2013.

“It can’t be overstated – this is an incredibly challenging time in health care,” said Daniel J. Loepp, BCBSM president and CEO. “The changing state of the health insurance market, economic pressures affecting businesses and health care providers, and pocketbook issues affecting nearly every consumer combine to make our approach to nonprofit health care incredibly complex.

“It is gratifying to see Blue Cross continue to perform strongly – growing membership, maintaining the financial strength our members rely upon, and maximizing income from investments to take as much pressure as possible off our health insurance members,” Loepp said. “We are keeping margins near 1 percent, while funding the business changes we must make and adding to reserves just enough to ensure continued stability. This level of financial performance allows us to continue to transform our business, work to make our operations more efficient and customer-responsive, and make the changes necessary to compete in the new health insurance market created by the Affordable Care Act.”

GAAP financial results for BCBSM include the company’s health insurance business, its investment portfolio and its subsidiaries. The net margin under GAAP of about one percent is calculated against $21.3 billion in consolidated revenue.

Investment and subsidiary performance remains solid, offsetting insurance losses

  • BCBSM once again outperformed benchmarks when managing its investments, achieving rates of return averaging just over 2 percent— with a conservative portfolio primarily invested in short term bonds. Investment income was $417 million on a consolidated basis.

Risk Based Capital reserve measurement is stable in 2013

  • 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, was stable. It increased slightly – by eight points over the past year — to 719 percent RBC.

GAAP revenue and claims expenses

  • Under Generally Accepted Accounting Principles (GAAP), a consolidated measure that includes BCBSM and its subsidiary companies, BCBSM revenues totaled $21.3 billion for 2013, up from $20.9 billion in 2012. BCBSM and its subsidiary companies paid $18.8 billion to fund benefits on behalf of customers and members.

Efforts to improve health care value and lower costs

  • BCBSM continued its collaborative work with doctors and hospitals in transforming health care delivery, saving millions of dollars and improving lives. BCBSM’s Value Partnerships initiatives, which seek to improve health care quality while reducing waste and errors, continued expanding in 2013 and producing outcomes aimed at more effective treatments for chronic conditions. The company also expanded hospital participation in the BCBSM value-based hospital reimbursement model, which is designed to evolve the focus of hospital payments toward supporting hospital success in improving patient outcomes and delivering care that is more coordinated and efficient.
  • BCBSM’s Patient-Centered Medical Home Program saved an estimated $155 million over its first three years, showing when physicians fully transform their practices to the PCMH model, the result is higher quality and improved preventive care. BCBSM designated 1,243 Michigan physician practices, which contain more than 3,770 physicians, as patient centered medical homes. The effort is the largest of its kind in the nation for the fifth consecutive year.

Blue Cross Blue Shield of Michigan, a nonprofit mutual insurance company, is an independent licensee of the Blue Cross and Blue Shield Association. BCBSM provides and administers health benefits to more than 4.4 million members residing in Michigan in addition to employees of Michigan-headquartered companies who reside outside the state. For more company information, visit and

Statutory financial reporting information

  • BCBSM also filed its Statutory-based Accounting Principles (SAP) financial statement with the State of Michigan. Statutory accounting does not reflect consolidated enterprise GAAP performance. BCBSM experienced a health insurance underwriting loss of $268 million, which was driven by losses in BCBSM’s individual segments. Careful management of investment earnings helped offset most of the underwriting losses. Net investment earnings on a SAP basis in 2013 were $169 million. The company posted a statutory net loss of $86 million on revenue of $6.6 billion.