Independence posts 2015 loss of $54.4 million
Like many other health insurers, Independence Health Group Inc., the parent of Independence Blue Cross L.L.C., had a rough 2015, thanks to Affordable Care Act growing pains.
Like many other health insurers, Independence Health Group Inc., the parent of Independence Blue Cross L.L.C., had a rough 2015, thanks to Affordable Care Act growing pains.
Independence, the largest insurer in the Philadelphia region, on Tuesday reported a net loss of $54.4 million, though it added nearly 400,000 customers - about half in its Medicaid business - and increased revenue by 4.7 percent, to $13.8 billion, from $13.2 billion a year earlier.
"We always expected there would be bumps in the road with the Affordable Care Act," chief executive Daniel J. Hilferty said.
"Some health insurers have said they are thinking about walking away from the Affordable Care Act. We're committed to reform. At Independence, we're not getting out," he said.
Independence last reported net losses in 2008 and 2009, when the country was in the midst of a devastating economic downturn. Net income in 2014 was $69.2 million.
Alan Krigstein, Independence's chief financial officer, attributed 2015's net loss to three main factors:
A significant increase in the use of services by Medicare beneficiaries and individuals who bought Affordable Care Act plans, particularly among those who were allowed to enroll outside the standard enrollment period.
The special enrollment period was designed so that people who had a life event, such as getting married, having a child, or losing health coverage, could still sign up for insurance.
"Validation for who qualified for special enrollment has been very inconsistent," Krigstein said.
Medical expenses for such customers averaged 30 percent more than for those who signed up for regular enrollment, he said.
Generally, insurers have complained that individuals waited until they had a health problem to sign up for insurance during the special enrollment period.
Increased costs for specialty drugs. For example, Independence spent $155 million on a drug to treat hepatitis C in 2015, up from $116 million the year before, Krigstein said.
Significantly increased ACA-related taxes and fees, to $263 million in 2015, from $204 million in 2014, Independence said.
To counter the trends, Independence is continuing its emphasis on new models of care, early intervention, and negotiating contracts with hospitals and others, which is expected to save $100 million annually, Krigstein said.
Not all systems are on board, Hilferty said.
The latest financial report on hospitals from the Pennsylvania Health Care Cost Containment Council showed an average total profit margin of about 5.5 percent, he said.
Without identifying the hospitals, Hilferty said the same report showed that there are some hospitals in Southeastern Pennsylvania that have had a three-year average total margin of well over 10 percent.
"These institutions need to embrace change and make affordable health care a priority. If they don't, they will either be part of the transformation or they will not be part of our network," he said.
The most profitable general hospitals in the region are part of the Main Line Health System, the state data showed. Paoli Hospital's three-year margin was 19.9 percent, and Bryn Mawr Hospital's margin was 14.5 percent.
Main Line officials could not be reached for comment.
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