• Membership increased to 4.4 million, medical claims and expenses rose by $800 million
• Targeted cost savings initiatives saved $392 million1 in medical expenses
• Average per-member medical services costs decreased by 3.3%2
• 2023 ACA rates remained, on average, lower than 2018 rates
• Blue Cross NC’s Blue Premier program saved nearly $500 million since 2019 launch
DURHAM, N.C. – Blue Cross and Blue Shield of North Carolina (Blue Cross NC) has reported its 2022 year-end financials, a year in which it navigated market unpredictability and inflation. Increased focus on the company’s efforts to reduce costs and continued savings in Blue Premier, Blue Cross NC’s groundbreaking value-based care program, positioned the company favorably to address rising costs. As a not-for-profit, fully taxed company without shareholders, Blue Cross NC is able to direct earnings toward keeping premiums as affordable as possible and lowering out-of-pocket costs.
“The economies of the U.S. and beyond continue to bring significant fluctuations in financial markets and a general rise in overall consumer prices,” said Mitch Perry, chief financial officer of Blue Cross NC. “At Blue Cross NC, we manage our company for the long term, remaining firm on our financial strategy and focused on our customers in order to make health care more affordable, accessible and easier to navigate.”
Record membership, revenue and medical expense costs
A summary of Blue Cross NC’s 2022 financial results3 is below.
- Revenue: $10.9 billion
- Net Income: $36.2 million
- Net Income Ratio: 0.33%
- Operating Income Ratio: -1.6%
- Taxes (Federal, State, Local): $25.7 million
- Claims and Medical Expenses: $9.0 billion
- Months in Reserve: 5.3 months
- Membership: 4.4 million4
Medical trend decreases despite high medical costs
In 2022, Blue Cross NC membership grew by 2.4%, to nearly 4.4 million. Its Healthy Blue Medicaid segment grew to more than 495,000 members in 2022. Blue Cross NC has proudly served Medicaid members since North Carolina implemented its Medicaid managed care transformation program in July 2021.
Through the company’s leading value-based care program, Blue Premier, and other cost-saving initiatives, per member health care costs decreased. Total Blue Cross NC claims and medical expenses rose by $800 million to $9 billion in 2022, as was largely expected with increased membership.
- Continuing to offer stability for its customers, Blue Cross NC maintained its 2023 ACA offerings across the state with rates that are, on average, lower than they were in 2018.
- Compared to 2021, average per-member costs for medical services (excluding prescription drug costs) decreased 3.3%.
- This includes a 5% reduction for its fully-insured commercial business and a 2.4% reduction for its Medicare Advantage business.
- Drug costs rose by 5.1% on a per-member basis in 2022, driven by a 9% increase in the cost of specialty drugs.5
- This includes a 3.1% increase for fully-insured commercial business and a 9.9% increase for its Medicare Advantage business.
- Climbing drug costs slowed significantly, when compared to the 10% increase for drug costs and 15% increase for specialty drug costs in 2021.
- COVID-19-related claims accounted for 3.2% of total claims costs, down from 5.6% in 2021.
Market volatility, net income impacts
Due to global inflationary pressures and high market volatility, Blue Cross NC’s corporate investment portfolio saw a $78 million loss in 2022. Unrealized losses of $247 million also affected net income. Despite these losses, Blue Cross NC achieved net income of $36.2 million, resulting in a net income ratio of 0.33%. Operating income ratio in 2022 was negative 1.6%.
Smaller but contributing factors that impacted Blue Cross NC’s operating income include making key investments in information technology systems, digital capabilities to enhance service for our customers, and initiatives to reduce medical costs and improve health quality outcomes.
Making health care more affordable
Blue Cross NC has invested in services for its members, keeping premiums stable and focusing on new and innovative ways to deliver care and keep costs down. These include COVID-19 pandemic initiatives, its Blue Premier value-based program and targeted cost savings initiatives.
Since the COVID-19 pandemic began in 2020, Blue Cross NC has worked to support its customers, health care providers and communities. The company has provided a total of $1.4 billion in COVID-related initiatives from 2020-2022, including claims, member, provider, and community direct and indirect financial support. This includes Blue Cross NC investing more than $7 million in direct COVID-19 relief in 2022 to help North Carolinians access nutritious food and other wellness essentials, as well as through support to community centers and crisis relief organizations.
Blue Cross NC’s value-based program, Blue Premier, achieved $130 million in cost savings and quality improvements in 2021. Since its launch, the program has achieved nearly $500 million in savings, with agreements in place for 12 major hospitals and health systems and almost 800 independent primary care practices across the state. The systems currently in Blue Premier account for nearly 70% of Blue Cross NC’s total medical expense, excluding prescription drugs.
Targeted Cost Savings Initiatives
In 2022, Blue Cross NC reduced medical expenses by $392 million through a number of targeted cost savings initiatives. Cost savings were achieved by partnering with providers to improve payment models, helping members gain access to the most effective and lowest cost drug options, proactively identifying members with complex needs to promote appropriate care and reducing wasteful spending by ensuring members receive the right level of care.
Investing to build stronger, healthier communities for the future
As part of the organization’s commitment to communities across the state, Blue Cross NC provides strategic funding in all 100 counties across North Carolina to help make health care better for all. In 2022, Blue Cross NC continued its work supporting innovative, sustainable initiatives, focusing on expanding access to health care across the state, with an emphasis on rural areas and diverse populations, including:
- Launching a $2 million multi-year capacity building initiative through “Strengthen NC"
- Investing $2 million in 11 mental health organizations
- Pledging $2 million in investments to 10 maternal and infant health organizations
Blue Cross NC will continue to work creatively to help build stronger, healthier communities. While the public policy, regulatory and competitive business environments in North Carolina create some uncertainty, Blue Cross NC is focused on making health care more affordable and easier to navigate in 2023 and beyond.
About Blue Cross and Blue Shield of North Carolina:
Blue Cross and Blue Shield of North Carolina (Blue Cross NC), the leading not-for-profit health plan in North Carolina, is committed to making health care more affordable, easier to navigate and accessible for all. Since 1933, the health insurer has created programs and initiatives to provide North Carolinians the opportunity to be healthy. Blue Cross NC serves its customers and communities of more than 4.4 million members, including approximately 1.2 million on behalf of other Blue Plans. Blue Cross NC is an independent licensee of the Blue Cross and Blue Shield Association. Visit Blue Cross NC online at www.bluecrossnc.com. All other marks are the property of their respective owners.
1 Based on 2022 claims data available as of February 2023
2 Includes average per-member medical costs across fully-insured Medicare Advantage and commercial lines of business in 2022, compared to 2021
3 Financial results, excluding months in reserve, are Generally Accepted Accounting Principles (GAAP) results. Net income ratio calculated based on 2022 Financial Accounting Standards Board recommendations.
4 Blue Cross NC medical members and members served on behalf of other Blues Plans
5 For fully-insured Medicare Advantage and commercial lines of business in 2022