Alex Brandon / AP
Health Care Service Corp. — the parent company of the Blue Cross and Blue Shield affiliates in Illinois, Montana, New Mexico, Oklahoma and Texas — recorded an $869 million profit in the first quarter of 2017, according to the company's latest financial documents. That was a $1.3 billion turnaround after HCSC lost $442 million in the first quarter of 2016.
How to interpret this: The Affordable Care Act exchanges in some areas are hurting, but overall are not imploding. Many insurance companies continue to do well (like Florida Blue) or are turning things around (like HCSC). And HCSC carries a lot of weight, since it covers nearly 1.1 million people in ACA plans and is the largest Blue Cross and Blue Shield company after Anthem.
What happened: A few one-time items inflated HCSC's profit. For example, Congress suspended the Affordable Care Act's health insurance tax for 2017, and accounting rules require an insurer to book the entire fee in the first quarter. But even without the one-time items, the insurer raised premium prices a lot, particularly for its ACA exchange plans, to offset costly medical claims.
"We still would've been profitable," said Carl McDonald, HCSC's divisional senior vice president of treasury and business development. "It's really been the individual business that's driven the turnaround this year."
HCSC had lost a lot of money in the ACA marketplaces, but took a couple fundamental steps to change its position:
- Created narrow networks of hospitals and doctors, which HCSC emphasized last year.
- Hiked premiums to account for how sick people in the individual market are.
- Eliminating the ACA insurance industry fee is icing on the cake, which is why large companies are pushing for its permanent removal.
Looking ahead: McDonald would not say what the company was doing for 2018, as rate filing deadlines approach and uncertainty lingers around the ACA's cost-sharing subsidies for low-income people. "At this point, it's hard to say," he said.