One of the things I’ve always enjoyed about working here at Blue Cross and Blue Shield of Louisiana is the freedom we enjoy as a not-for-profit company. I spent some time in the for-profit, Fortune 500 world earlier in my career, and although I could probably have made more money there, I could never enjoy the freedom to act in the best interest of LOUISIANA that I have here.
In a typical publicly traded company, where everybody is hyper-focused on the stock price, constant consultation goes on between the company’s leaders and their “advisers” on Wall Street. In those situations, analysts and well-meaning outsiders have a huge amount of influence on the way companies behave, and at the end of the day, their primary responsibility is to their shareholders, not to their customers or employees.
Blue Cross and Blue Shield of Louisiana is different. If you are a Blue Cross policyholder, YOU are an owner of this company. Although we are part of the national Blue Cross and Blue Shield Association, we are only licensed to do business in Louisiana, sort of like a franchise with Louisiana as the only territory. This means we are completely focused on what happens here. Not anywhere else.
I like to say working at Blue Cross here in Louisiana means I have the freedom to make Louisiana decisions, for Louisiana’s people, for Louisiana reasons. It’s a very rare situation.
Another thing that is critical to my relationship to my state, and the 1.8 million of us walking around with a Blue Cross card in our pockets, is my ability to be completely transparent with you about how we spend your money. Because even after you pay us your premiums, and we take over managing of that healthcare treasure for you, it’s still your money.
I can report to you that the last full year’s data (2019) was encouraging to me. During that year, the good residents of our state entrusted us with more than $3.5 BILLION of their hard-earned treasure to make sure their serious healthcare needs did not ruin them financially. In a state that is 49th in household income nationally, that is a huge amount of trust.
So, Mike, What Happened to All That Money?
Well, let’s start with a picture, and then I can explain what it means, and how it is changing.
The lion’s share of the money we took in through premiums last year, 37%, or a bit over $1.3 BILLION, was paid directly to hospitals caring for our members, mostly in inpatient stays or ER visits. I always tell people, if you want to know why health insurance costs as much as it does, look directly to hospital charges and utilization.
Moving up quickly in absorbing your healthcare dollars is the amount we spent on prescription drugs. Some of these drugs were given in a hospital, some at a doctor’s office, and some were simply picked up at the pharmacy, but they represent 28% of all the money our members paid into Blue Cross in 2019, some $980 MILLION plus.
And 22% of the 2019 premium dollars, or about $770 MILLION, paid for a variety of things in an outpatient setting like doctor’s visits, specialist visits, lab work, imaging, physical therapy, home health and the like. This sector of our spending is actually a bargain by today’s standards, as these prices are not climbing nearly as quickly as hospital and drug costs.
Finally, 13% of the money paid in, some $455 MILLION, covered all the overhead in the health insurance system. This includes categories like taxes (yes, even as a not-for-profit we are still subject to federal and state taxes and fees), commissions (agents and brokers represent employers in the health insurance coverage they buy for their employees), the actual salaries of our workers, and the costs to maintain our regional offices around the state. I’ve always thought this was a great investment. After all, what other health insurance company offers you face-to-face help (in normal times) in Louisiana in places like Alexandria, Houma or Monroe?
It’s also worth remembering that our employees’ pay only consumes between 6 and 7% of all the money paid in. You’d be hard pressed to find any company in Louisiana that is as large as Blue Cross and can run so efficiently. I’m especially proud of the fact that we run a very lean operation.
What Can We Learn From This?
I joined Blue Cross way back in November 2004. I can still remember the first time I saw one of these “health insurance dollar bill” diagrams from our financials for the whole year of 2005. We can learn a lot about what is stressing our healthcare system by looking at how we spent your money back then.
Check this out:
It was a whole different ball game back then. Notice immediately that hospitals got about the same cut they get today, 38% of the spending back then. Then, the real shock hits: Drugs were only 11% of spending in 2005; now they are 28% of spending! And outpatient/physician services have paid the price — their share of the healthcare dollar went down from 34% to 22% in 2019. Where did their share go?
Right into the pockets of the drug companies, and the entities that distribute drugs. It’s a real problem. Drugs are eating up a larger and larger share of an increasing healthcare dollar every single year. Prices are high and getting higher, and customer/member expectations about health insurance covering any service no matter how much it costs continue to grow and get more shrill. I’ve covered how this happened in a previous series here on Straight Talk.
So, what do we do about that? That’s for another Straight Talk. We can discuss in a lot more detail how other countries manage to get by spending way less on drugs than we do in a future one. Spoiler alert: It involves government control and patient compromises.
Straight Talk is, the money you are paying for your Blue Cross health insurance is YOUR money, and we are responsible for managing it as efficiently and carefully as possible so it will be there to pay the bills if you get sick.
That’s our job. It’s why we are here. Thanks for hanging with us here at Blue Cross and Blue Shield of Louisiana.