Mike originally wrote and published this piece in 2015. Blue Cross has gotten similar messages from members in the years since, so he decided to go back and update it.
We got the message above on Facebook years ago, and it’s a question that keeps being asked. As a Blue Cross member, the author – and all our members who have asked similar questions in the years since this one came in – is entitled to all the transparency our financial statements can give.
In this post, I’m going to lay out our finances here at Blue Cross and Blue Shield of Louisiana for all of our members to see. It’s only fair. I can’t put any money back into your pocket, but you surely deserve to know where your money goes.
An Updated Take on Our Financials
Let’s start with 2019, since I have complete financial data for that entire year. I’ve talked about this data before, but I’m taking a different tack this time.
I can report to our fully insured group members and individual customers (including the ones who buy insurance on www.healthcare.gov) that in 2019 we took in $3.54 billion in premiums, right here in Louisiana.
Yes, more than $3 billion. This is a staggering sum by any measure. It is CRITICAL to me that our members/owners know where every single dollar went. Let’s start with the basics:
During 2019, we sent 37% of that sum, more than $1.3 billion, directly to the hospitals around the state and nation that cared for our members. So, for every dollar you paid in premiums, 37 cents of it went straight to hospitals. Or to think of it another way, if your premium was $500/month, $185 of that money went straight to a hospital. (A $500 premium is about the average rate for group and individual members.)
Likewise, we spent 28% of the premium payments we took in on prescription drugs for our members — about $980 million. Of our $500 premium, that’s another $140 that bought medications for our members.
Another 22% of the money, about $770 million, paid for doctor visits, lab tests, imaging and outpatient surgery-type expenses. That’s $110 of the premium money we took in. So far, we’ve accounted for 87% of the premiums our members paid in, or roughly $435 of the $500 monthly premium we’re using in this example. What about the rest of it, the other $65?
About $15 of our imaginary $500 premium, or 3% more, went directly to the government in the form of taxes and fees. And 6% of the total, around $30, paid the salaries of every Blue Cross employee and the overhead of running our operations. Another 4%, or $20, paid all the outside entities that help companies buy insurance and take care of the individual customers. These are the people provide guidance and experience to help you find affordable coverage.
When all the expenses were paid in 2019, we had less than 1% (about $5 of the $500) left over. Since we are a not-for-profit company, that money went into a bank account for a rainy day. Here’s a table to sum up where that money went, based on the $500/month premium we are basing this on:
What you might call “profit” was less than 1% of the total premium dollars collected in all of 2019. About $5 on the $500 premium.
What Will the Numbers Look Like After the Past Year?
We know that when we run the numbers, 2020 and 2021 will be different. The stress and strains of providing care for a new and burgeoning population of people with COVID-19, and the number of people avoiding care due to fears of catching COVID-19 are really changing the way money moves through the healthcare system, in ways we did not anticipate.
Couple that with federally specified insurance changes that will drive more costs, and we could see very different financials by the time we tabulate everything for ’20 and ’21. That “Profits/Reserves” last line will become harder to predict over time, but you can count on us doing everything possible to control “external sales costs” and “salaries and overhead” every single day. While Blue Cross did not lose money in 2020, what happens in 2021 is still up for grabs.
Luckily, we are a Louisiana-strong company with an 85-year history in this state, and we have reserves to keep us strong. But we need to think long-term and see how we can right the ship soon and consider other options.
And if you were wondering how the government fits into all this? There is a federal law that guarantees that we can’t make massive profits. The law says we have to run our entire operation, which is all of our operating costs other than the medical expenses, on no more than 15% of the money we take in (from our larger employer group customers) or 20% of the money we take in (from individuals and small companies). No insurance company is allowed to operate on more than that; if they do, they have to pay rebates to their members/owners. (That’s you.) In fact, in anticipation of making a little too much in parts of 2020, we went ahead and issued rebates and premium tax credits that totaled tens of millions of dollars to more than 18,000 companies..
I know this explanation won’t lower your premiums any or put any more money in your pocket, but you deserve to know exactly what’s happening and why. There are no “massive profits” here at Blue Cross, and if there were, we’d be THRILLED to lower rates and put a smile on our customer’s faces. Surrounded by our customers every day, more than one in three Louisianians, how could we not take pleasure in improving your financial situation? We live, work and do business right alongside you. You’re our neighbors, friends and family members.
Nothing would make me happier, I can tell you that.