Blue Cross 2015 Financials: ACA Losses Grow; Improvements in Other Lines of Business, Strong Investments Create Small Profit

CHAPEL HILL, N.C. – While medical costs continued to rise last year, Blue Cross and Blue
Shield of North Carolina (Blue Cross) ended 2015 with an improved net income of $0.5 million
as compared to the previous year’s ($50.6) million loss.

“In the year to come, our focus is to make sure our plans are sustainable for our business and
for our customers,” said Gerald Petkau, senior vice president and chief financial officer. “The
environment remains volatile, and medical claims and expenses continue to increase. ACA plan
losses grew this year and led to overall operational losses. However, the losses were offset by
improvement in other lines of business and investment income. Our reserves declined due to
ACA costs, but overall, the company remains well capitalized and financially stable.”

*Financial results, excluding months in reserve, are GAAP consolidated results.

Medical Expenses, ACA Medical Costs Remain High

Claims and medical expenses increased to $6.5 billion, up from last year’s claims of $6.4 billion.
Some of the key drivers of medical expenses were specialty pharmacy drugs, orthopedics
procedures, cardiology procedures and cancer treatment (chemotherapy and injectible drugs.)
Health care costs from ACA members contributed to high medical expenses. ACA members
currently comprise 36 percent of Blue Cross’s fully insured membership. As Blue Cross
projected, the ACA group was older and sicker. That book of business alone was responsible
for a loss of $282 million. The ACA plan customers proved to be high users of medical care
across the board in inpatient, outpatient, professional services and pharmacy. This population’s
use of orthopedics procedures was significantly higher than other individual fully insured
members. In addition, ACA members were high users of emergency room procedures and
specialty drugs.

In 2015, the amount the company spent on customers’ medical care (Medical Care Ratio) was a
little over 87 cents per premium dollar. That was the fourth consecutive year that Blue Cross
exceeded Federal requirements, and this past year, Blue Cross exceeded the requirement by
$515 million.
 

Customer Base Slightly Lower, Prudent Reserves
Blue Cross’s customer base fell slightly to 3.89 million from 3.91 million customers in 2014. This
includes over 1.0 million members served on behalf of other Blue plans.

Blue Cross maintained reserves at a prudent level. Reserves in 2015 represent 3.2 months of
claims and expenses compared to 3.6 months of claims and administrative expenses the
previous year. The company is required to maintain these reserves within the 3 – 6 months
range set by State law.

As a fully taxed company, Blue Cross incurred $372.0 million in local, state and federal taxes
and fees in 2015.

About Blue Cross:
Blue Cross and Blue Shield of North Carolina improves the health and well-being of our
customers and communities by providing innovative health care products, services and
information to more than 3.89 million members, including approximately 1 million served on
behalf of other Blue Plans. Since 1933, we have worked to make North Carolina a better place
to live through our support of community organizations, programs and events that promote good
health. We have been recognized as one of the World’s Most Ethical Companies by Ethisphere
Institute every year since 2012. Blue Cross and Blue Shield of North Carolina is an independent
licensee of the Blue Cross and Blue Shield Association. Visit BCBSNC online at bcbsnc.com. All
other marks are the property of their respective owners.