An insurance rating agency says the outlook for Blue Cross and Blue Shield of Minnesota has turned negative after the Eagan-based health plan posted large financial losses again last year while also seeing big expenses with a new IT system.
In a report this week, New Jersey-based A.M. Best revised the insurer's outlook from stable to negative, but also affirmed the "excellent" financial strength and long-term credit ratings of Blue Cross and a related HMO called Blue Plus.
For 2016, Blue Cross posted a pretax net loss of $194.4 million on $12.1 billion in revenue. The insurer posted a loss the previous year of $153.5 million.
"The outlook changes were not a surprise, as they reflect recent financial losses in our core businesses, as well as the ongoing instability taking place in the individual and Medicaid markets," Blue Cross said in a statement.
Several health insurers have reported red ink in the individual market, which is the source of coverage for those who are self-employed or don't get job-based benefits. The market is undergoing changes with the federal Affordable Care Act.
At least one other HMO in Minnesota has reported significant losses stemming from competitive bids in the state's Medicaid program Minnesota hires HMOs to manage care for most Medicaid beneficiaries.
The A.M. Best report also cited "expenses related to the technical and process implementation supporting the transition to the new operating model platform." Blue Cross cited these costs in response to a recent state Department of Health report that found increased administrative costs at health plans during 2015.
To date, Blue Cross has incurred $335 million in expenses implementing the IT platform, which includes a variety of functions including claims payment and care management. Blue Cross of Minnesota has hired a subsidiary of Pittsburgh-based Highmark Blue Cross Blue Shield for the work.
"Operating losses are projected to continue with a further decline in capital in 2017," the rating agency said. But the report also noted Blue Cross controls one-third of the state's market.
In its statement, Blue Cross said it was pleased with the A.M. Best findings overall, because the insurer has maintained a strong financial rating. "As the oldest and largest nonprofit plan in the state, we are committed to maintaining a level of financial stability that instills member security and confidence," Blue Cross said.
Christopher Snowbeck • 612-673-4744
