A.M. Best Special Report: Blue Cross Blue Shield Results Indicate a Negative Impact in 2008

The year 2008 was challenging for Blue Cross Blue Shield companies as a whole, and the trouble spanned all groups. Aggregate results for Blue Cross Blue Shield plans in this A.M. Best Co. study show a net income decline of 40.9%—a result of drops in both underwriting and investment income, year over year, as well as realized losses.

For the total of Blue Cross Blue Shield plans (in this study):

• A 6.6% increase in net premiums written (NPW) was reported. The 2008 NPW growth rate was slightly higher than that of 2007, 5.9%, but lower than 2006’s 9.1% rise.
• The health care expense ratio improved 20 basis points (bps) to 85.9%.
• A 10.3% decline in capital and surplus—to $41.6 billion—was reported, bringing that key measure back down to a level not seen since 2005.
• There was a 30 bp decline in the sales, general and administrative (SG&A) expense ratio in 2008, after remaining flat in 2007.
• Underwriting earnings declined for the third year in a row, although the 5.5% decrease in 2008 was much less than the 24.6% and 8.5% declines in 2007 and 2006, respectively.

• Given the 2008 financial market turmoil combined with the low interest rate environment, investment income declined by 19.0%.
• An unrealized loss of $3.1 billion was reported for 2008, compared with gains of $285.5 million in 2007 and $1.9 billion in 2006.