Jun 15, 2018

A $2.3 billion tax gain for the Blues

Blue Cross and Blue Shield of Michigan headquarters.

Blue Cross Blue Shield of Michigan headquarters in Detroit. Photo: Raymond Boyd/Getty Images

The Republican tax overhaul didn't just benefit publicly traded health care companies. The Blue Cross and Blue Shield insurers collected a major windfall, too.

By the numbers: 15 Blue Cross and Blue Shield companies cumulatively reaped $2.26 billion in tax savings just in 2017 from favorable changes to their "net deferred income taxes," according to a new report from ratings agency A.M. Best.

The details: Eliminating the corporate alternative minimum tax, a policy that ensured companies pay some minimum level of taxes on their income, created a lot of the benefit for the Blues. It also helped that Republicans kept a special tax loophole that only applies to certain Blue Cross and Blue Shield insurers.

  • Almost half of the 2017 tax reform benefits ($1.1 billion) accrued to Health Care Service Corp., the Chicago-based insurer that owns Blue Cross Blue Shield plans in five states.
  • The next two Blues that earned the biggest windfalls were the affiliate companies in Michigan ($358 million) and New Jersey ($319 million).
  • Credits associated with the alternative minimum tax "will have a positive impact on 2018 net income" and future years, A.M. Best analysts wrote in their report.

The bottom line: The millions of dollars spent on tax lobbying by the Blue Cross Blue Shield Association, HCSC and other Blues affiliates paid off.

What to watch: 2019 premium rates for all health plans sold by the Blues.

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