Last year was even more punishing for Oregon’s health insurers than it looked. They cumulatively lost $219.3 million in 2015, according to annual reports filed with the National Association of Insurance Commissioners this week.
The financial reports portray Regence BlueCross BlueShield as a rare healthy insurer in an otherwise bruised industry. Regence BCBS was the only major Oregon insurance company to post a profit last year, of $25.8 million.
Health Republic – which had already stopped selling Oregon insurance plans and announced it would exit the market in 2016 – revealed that its struggles added up to a $29.3 million net loss last year. Moda, which drew a regulatory crackdown over its capital reserves in January but has stayed afloat by selling assets and borrowing, reported a $49.5 million net loss for 2015.
Providence Health Plan’s $63 million net loss was even steeper, though the much larger company has been able to weather the hits so far. LifeWise Health Plan of Oregon lost $35.7 million last year; Health Net Health Plan of Oregon lost $25.4 million; Oregon’s Health CO-OP – still a startup – lost $18.4 million; Kaiser Permanente lost $13.5 million; and PacificSource Health Plans lost $10.2 million.
The capital ratios that state regulators use to analyze the well being of these health insurance companies are trade secrets and not subject to public disclosure under state or federal records laws. But the other details filed by Oregon’s insurers provide a snapshot into their trials and tribulations over the 2015 calendar year.
Regence BlueCross BlueShield of Oregon
Snapshot:
- Total members: 495,242, up 4.9 percent from 2014.
- Profit in 2015: $25.8 million, following a $35.9 million profit in 2014.
- Cash & equivalents on Dec. 31: Negative $9.8 million, compared to $70.4 million a year earlier.
- Hospital and medical costs: $1.6 billion, down 1.8 percent.
- Lobbying & trade group spending: $102,584 to BlueCross BlueShield Association.
Though Regence BlueCross BlueShield of Oregon reported a net profit, its self-insured employer clients actually wound up being money losers. Regence BCBS reported an operating loss of $18,693 from administrated services only plans, and an operating loss of $37.7 million from these plans in 2015.
Kaiser Permanente
2015 snapshot:
- Total members: 475,594, up 1.5 percent from 2014.
- Net loss: $13.5 million, following a $15.6 million loss in 2014.
- Cash & equivalents on Dec. 31: $6.5 million, down from $33.4 million a year earlier.
- Hospital and medical spending: $3.1 billion, up 7.5 percent.
- Notable lobbying or trade group spending: $206,812 to the Oregon Association of Hospitals and Health Systems.
Kaiser Permanente has long had some of the largest retirement-related liabilities of insurers in Oregon, but it reported that it’s been chipping gradually away at its effort to fund retirees’ benefits. At the end of 2015, it had $375.97 million in pension liabilities remaining on its books, down from $407.5 million a year earlier, as well as $296.6 million in other post-retirement liabilities, down from $386.2 million a year earlier.
As of Dec. 31, Kaiser reported its cash balances were negative – it was in overdraft by $4.5 million – compared to negative $1.6 million on Dec. 31, 2014.
Providence Health Plan:
Snapshot:
- Total members: 218,421, up 16.5 percent from 2014.
- Net loss in 2015: $63 million, compared to a profit of $22.3 million in 2014.
- Cash & equivalents on Dec. 31: $130.3 million, up from $56.7 million a year earlier.
- Hospital and medical costs: $44.8 million, up 16 percent.
- Lobbying & trade group spending: $88,386 to America's Health Insurance Plans.
Providence, which covers government workers in the state through the Public Employees Benefit Board, reported a $683,757 liability listed as a “PEBB Health Improvement Fund” at the end of 2015. That figure was $703,387 for this line item a year earlier.
While many insurers reported losses on their self-insured employer clients, Providence reported a net operational gain of $12.1 million from its administrated services only plans.
Moda Health Plan
Snapshot:
- Total members: 216,267, up 4.1 percent from 2014.
- Net loss in 2015: $49.5 million, following a $5.2 million 2014 net loss.
- Cash & equivalents on Dec. 31: Negative $32.9 million, compared to negative $30.7 million a year earlier.
- Hospital and medical costs: $1.17 billion, up 41 percent.
- Lobbying & trade group spending: $26,500 to A.M. Best Company.
Moda Health added 8,418 new members over the course of 2015. Its net premium income climbed 3.7 percent, to $777.1 million. To support that growth, Moda recruited new doctors and nurses – ending 2015 with 30,682 provider relationships, up from 26,902 at the start of the year.
But growth is costly, the company’s annual financial report shows, in evidence that Moda’s rapid expansion over recent years seems to have contributed to the financial hardship it now faces.
Hospital and medical costs are Moda’s largest expense category, consuming $1.17 billion in 2015 – up from $829.1 million the year before.
Among other 2015 Moda expenses, the company spent:
- $54.9 million on salaries, wages and benefits.
- $28.2 million on commissions.
- $2.96 million on marketing and advertising.
- $3.2 million on auditing, actuarial and other consulting expenses.
- $7.2 million on outsourced services, including electronic data processing.
- $10.8 million on electronic data processing equipment, and related depreciation costs.
This January, it appeared that Moda would be forced to exit the individual health insurance market because of regulators’ concerns about its financial position. In February, state officials announced that Moda would continue operating in Oregon, after it developed a plan to improve its capital position.
Late last year, the company took on debt, its annual report reveals. At the start of the fourth quarter of 2015, Moda already had $60 million in loans on its book – including a $50 million December 2014 surplus note to OHSU that matures in 2025. A “surplus note” is a bond-like form of debt issued by insurance companies, and counted as capital rather than a liability on the company’s balance sheet.
On Nov. 15, Moda Health Plan’s parent company, Moda Inc., issued a $50 million surplus note to the insurer at 4 percent interest, maturing in 2025. On December 31, the Moda Health issued a $13 million surplus note to Oregon Dental Service, a sister company, this time at 4 percent interest and with no specific maturity date. And also on Dec. 31, Moda Health Plan issued a $50 million surplus note to Moda Inc. – this one with no interest due, and no specific maturity date.
Interest on these notes can only be paid with the approval of the Oregon Department of Consumer Business Services. And if Moda is dissolved, these lenders will be last in line to collect on anything that Moda owes, after policyholders, providers and all other creditors, according to the company’s annual report.
Moda expects to owe $29.7 million by Sept. 30, 2016, when its annual health insurance industry fee is due.
PacificSource Health Plans
Snapshot:
- Total members: 168,480, up 0.6 percent from 2014.
- Net loss in 2015: $10.2 million, compared to a $16.9 million profit in 2014.
- Cash & equivalents on Dec. 31: $13.03 million, up from $9.1 million a year earlier.
- Hospital and medical costs: $509.6 million, down 8.8 percent.
- Lobbying & trade group spending: Below threshold requiring the company to disclose spending.
Though PacificSource is in talks over a planned partnership with Legacy Health, the insurance company’s annual report to regulators does not discuss this potential future arrangement.
While many insurers reported losses on their self-insured employer clients, PacificSource reported a net gain of $1.6 million on administrative services contracts.
Health Net Health Plan
Snapshot:
- Total members: 80,294, up 10 percent from 2014.
- Net loss in 2015: $25.4 million, following a $43.8 million 2014 net loss.
- Cash & equivalents on Dec. 31: $32.9 million, up from $11.1 in 2014.
- Hospital and medical costs: $399.6 million, up 34.4 percent
- Lobbying & trade group spending: Below threshold requiring the company to disclose spending.
With a deep pocked parent company that’s shown a willingness to bail it out, Health Net appears positioned to weather its financial challenges. As Health Net Inc. of California moves ahead with an announced merger with Centene Corp., a Fortune 500 company, time will tell whether new ownership affects Health Net’s Oregon options. According to the annual report filed by Health Net March 1, the acquisition by Centene is still waiting approval by some regulators, though Oregon officials have already okayed the plan.
LifeWise
Snapshot:
- Total members: 66,007, up 41.9 percent from 2014.
- Net loss in 2015: $35.7 million, following a $24.3 million 2014 net loss.
- Cash & equivalents on Dec. 31: $7.2 million, compared to $5.3 million a year earlier.
- Hospital and medical costs: $255.4 million, up from $80.6 million.
- Lobbying & trade group spending: $15,100 to AM Best Company; $15,000 to the National Committee for Quality Assurance.
LifeWise is owned by Connexion Insurance Solutions Inc., which is owned by Premera Blue Cross, based in Washington.
In disclosures about legal risks it faces, LifeWise reported to regulators that a class-action suit against Premera Blue Cross, filed in October 2015, alleges violations of state and federal laws stemming from a 2014 cyberattack on Premera’s networks.
LifeWise’s self-insured employer clients have lost the company money. It reported a net loss from operations of its administrative services contracts of $1.4 million.
This insurance company is disproportionately dependent on a small number of relationships, it disclosed in its annual report, with Columbia Distributing, Marquis Companies and Smith Equipment & Welding each contributing greater than 10 percent of receivables for the company
Oregon’s Health CO-OP
Snapshot:
- Total members: 15,039, up 850.6 percent from 2014.
- Net loss in 2015: $18.4 million, compared to a $6.8 million 2014 net loss.
- Cash & equivalents on Dec. 31: $5.1 million, compared to $1.6 million a year earlier.
- Hospital and medical costs: $64.9 million, compared to $2.8 million the previous year.
- Lobbying & trade group spending: $16,926 to NW Grassroots & Communications.
Created after the Affordable Care Act established a new tax-exempt category for health insurance nonprofits that receive CO-OP program grants or loans and meet other requirements, Oregon’s Health CO-OP has grown its member rolls significantly over the past year, but has depended on debt to get there.
It was created with help of a $49.5 million loan to create solvency (interest rate: 0.37 percent) and a start-up loan from the Centers for Medicare & Medicaid Services, which has a $7.2 million balance, according to its annual report. This year, Oregon’s Health CO-OP converted its $7.2 million loan to a surplus note, an accounting change that improves the condition of its balance sheet.
Health Republic
Snapshot:
- Total members: 11,660, up 32.2 percent from 2014.
- Net loss in 2015: $29.3 million, following a $12.9 million 2014 net loss.
- Cash & equivalents on Dec. 31: $9.9 million, compared to $6.9 million a year earlier.
- Hospital and medical costs: $69.3 million, up 138.6 percent.
- Lobbying & trade group spending: $10,368 to NW Grassroots & Communications.
Like Oregon’s Health CO-OP, Health Republic depended on debt to get off the ground and grow. But cuts to risk corridor reimbursements it had been counting on were brutal to the company’s bottom line, pulling its net premium down by nearly $12 million last year.
It was placed under administrative supervision by the Oregon Insurance Division, and in October Health Republic announced it was done enrolling new Oregonians in its plans.
-- Courtney Sherwood can be reached at [email protected], or follow her on Twitter at @csherwood.
