IBC posts $67 million profit for 2016

Independence Health Group, the parent of Independence Blue Cross LLC, the largest health insurer in the Philadelphia region, pulled through 2016 with a net profit of $67 million, despite the turmoil surrounding the fate of the Affordable Care Act, the company said Thursday.

The result represents a major swing from a $54.4 million loss in 2015, when the company struggled with ACA growing pains, particularly in New Jersey, where Independence operates as AmeriHealth New Jersey.

Independence's revenue climbed strongly, to $16.7 billion last year, up 21 percent from $13.8 billion the year before, thanks largely to gains at Medicaid-subsidiary AmeriHealth Caritas. That unit benefited from the addition of 371,000 members nationally through expanded Medicaid and a new Medicaid contract in Iowa.

"2016's been a year of positive results, even with all these challenges we've been talking about in health care," Independence president and chief executive Daniel J. Hilferty said.

As to where politicians go with the ACA, Hilferty said he welcomes an ongoing discussion, but he wants to see the Trump administration follow through on its plans to implement rules to stabilize the market.

Those rules, expected to go into effect April 6, would shorten the open enrollment period, tighten the process around special enrollment periods, and require consumers to pay past-due premiums before they can reenroll for insurance for the next year with the same company.

"We're encouraging them to make sure that happens. Then let's get in a robust discussion," Hilferty said.

That discussion should be about what the market will look like next year and in 2019 for people who now have insurance through the ACA. "We've got all these people who have coverage. Nobody wants to see these people thrown off coverage," Hilferty said.

Gregory E. Deavens, who joined Independence as chief financial officer in January, said highlights for 2016 included strong financial results in Medicare managed care and in insurance for commercial groups.

Another positive in 2016 was a renegotiated contract with Independence's pharmaceutical benefits manager OptumRx. That generated earnings last year and will provide more competitive pricing in the future, Deavens said.

Partially offsetting those positives were certain ACA insurance plans, particularly in New Jersey. "The results were not particularly strong, so that was a source of losses for us in that market," Deavens said.

AmeriHealth Caritas, which Independence jointly owns with Blue Cross Blue Shield of Michigan, accounted for $1.5 billion to $2 billion of Independence's $2.9 billion gain in revenue last year.

In Pennsylvania, AmeriHealth Caritas gained 205,000 members through Medicaid expansion. Nationally, Louisiana and Michigan accounted for substantial increases.

The announcement on March 1 that a judge had signed off on the liquidation of long-term care insurer Penn Treaty Network America Insurance Co. and an affiliate means that Independence solvent insurers must split the tab for Penn Treaty's shortfall.

Deavens estimated, based on information from last summer, that Independence's share will amount to $70 million to $90 million, a loss that will affect this year's results.