• The company recorded a net loss of $50.6 million or 0.6 percent due to a sharp rise in claims and medical costs in Individual Under 65 Plans (including Affordable Care Act plans) and Medicare Advantage products
  • Medical claims spending rose to $6.4 billion, with over 87 cents of every premium dollar spent on medical care 
  • Membership grew to 3.91 million customers from 3.84 million resulting in revenue of $8.0 billion

CHAPEL HILL, N.C.Blue Cross and Blue Shield of North Carolina (BCBSNC) ended 2014 with a net loss of $50.6 million due largely to higher medical costs associated with ACA customers and poor performance in Medicare Advantage products. The impact of uncertainty from changing rules regarding the ACA also contributed to the loss. The company continued investments in technology and infrastructure to serve customers more efficiently. BCBSNC gained more customers and that gain is reflected in higher revenue for the year.

“We are working in a volatile environment with high risk. While disappointing, this year’s results are not surprising given the trends we observed throughout the year,” said Gerald Petkau, senior vice president and chief financial officer. “Having adequate reserves means we are well-positioned to weather this difficult year. The company is strong, well capitalized and well positioned for the future.” 

Financial Results* 2013 2014
Revenue $6.4 billion $8.0 billion
Consolidated Net Income (Loss) $92.6 million ($50.6 million)
Net Income Ratio 1.4 percent (0.6 percent)
Taxes (Federal, State, Local) $118.3 million $266.7 million
Claims and Medical Expenses $5 billion $6.4 billion
Medical Care Ratio 85.9 percent 87.3 percent
Months in Reserve 4.9 months 3.6 months
Membership 3.84 million 3.91 million

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

Medical Expense Trend Rises Sharply, ACA Medical Costs High

In 2014, the amount the company spent per premium dollar on customers’ medical care (Medical Care Ratio) increased to over 87 cents per premium dollar compared to the previous year’s spending of 85.9 cents per premium dollar.

Claims and medical expenses increased to $6.4 billion, up nearly $1.4 billion or 28.2 percent compared to 2013. Medical trend also increased to 22.6 percent, up from last year’s 4.2 percent. Procedures that drove medical expense trend were orthopedics, cardiology procedures and cancer treatment. Spending on specialty pharmacy increased more than 12 percent.

Healthcare costs from newly enrolled ACA members contributed to increased medical expense trends. ACA members currently comprise 31 percent of BCBSNC’s fully insured individual membership. As BCBSNC projected over a year ago, the ACA group proved to be high users of medical care across the board in inpatient, outpatient, professional and pharmacy. For example, ACA individual members incurred medical costs of $435 per member per month while non ACA individual members’ medical costs were $256 per member per month in 2014. This population’s use of orthopedics procedures was more than double other individual fully insured members. Also, ACA members were high users of emergency room procedures and specialty drugs, such as those to treat Hepatitis C.  

Challenging Year for Medicare Advantage

BCBSNC also saw losses in its Medicare Advantage line of business. This was due to increased medical claims (including specialty pharmacy) and in changes to the way Medicare reimburses insurers. BCBSNC restructured its Medicare plan offerings and the cost of these plans last year to ensure the sustainability of these products.

More Customers, More Revenue, Prudent Reserves

BCBSNC’s customer base grew to 3.91 million customers, up from 3.84 million in 2013. This includes over 1.0 million members served on behalf of other Blue plans. As a result, revenues increased nearly 25.0 percent to $8.0 billion in 2014.

BCBSNC maintained reserves at a prudent level. Reserves in 2014 represent 3.6 months of claims and expenses compared to 4.9 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.

“Our 2014 results reflect a year of unprecedented change. Despite the negative results our reserves have kept us strong,” said Senior Vice President and Chief Financial Officer Gerald Petkau. “We are making investments in systems and technology that will bring new efficiencies to manage healthcare costs. These investments will provide long term benefits for our customers.”

As a fully-taxed company, BCBSNC incurred $266.7 million in local, state and federal taxes and fees in 2014.


Blue Cross and Blue Shield of North Carolina is a leader in delivering innovative health care products, services and information to more than 3.91 million members, including approximately 1 million served on behalf of other Blue Plans. Since 1933, the company has served its customers by offering health insurance at a competitive price and has served the people of North Carolina through support of community organizations, programs and events that promote good health. Blue Cross and Blue Shield of North Carolina was recognized as one of the World’s Most Ethical Companies by Ethisphere Institute in 2012, 2013 and 2014. 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.