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BlueCross BlueShield of WNY’s parent rebounds for $63 million net income

The parent company of BlueCross BlueShield of Western New York posted net income of $63.8 million in 2015, a sharp turnaround from the year before as the company reined in steep losses from its government insurance programs.

HealthNow New York saw its revenue drop from $2.46 billion to $2.25 billion, but the Buffalo-based insurer lowered its expenses even further. It reported an operating gain of $28.9 million last year – a year after posting an operating loss of $117.3 million, according to the company’s annual state regulatory filing. Its net loss in 2014 was $53.2 million, and expenses fell from $2.56 billion in 2014 to $2.21 billion in 2015.

A big part of the improvement came in HealthNow’s Medicare Advantage program, where the company raised prices on some of its plans and, in one case, excluded non-emergency visits to most Catholic Health System hospitals. The insurer went from losing $79 million on its Medicare Advantage program in 2014 to earning $2.8 million in 2015, according to the company’s filings.

“This has been part of a multi-year strategy where we said we’ve got to take some actions to correct that imbalance,” Stephen T. Swift, HealthNow’s executive vice president and chief financial officer, said in an interview.

Most of the state’s nonprofit insurers struggled financially in 2014, and HealthNow was no exception. The company, headquartered in Buffalo, operates as BlueCross BlueShield in the eight counties of Western New York and as BlueShield of Northeastern New York in the Albany area.

HealthNow officials set out to tamp down the losses, notably in the company’s managed Medicaid and Medicare Advantage programs that Swift said are hampered by reimbursements from the government that don’t cover the plans’ costs.

HealthNow has since 2014 frozen enrollment in its managed Medicaid program, as it seeks a strategic partner to administer the program.

The company made $3.6 million on $167 million in managed Medicaid revenue in 2015. In its Medicare Advantage program, premium income fell by $154.7 million between 2014 and 2015 but expenses fell by $236.5 million over the same period, leading to the major improvement in the program’s finances. The company saw enrollment in its Medicare Advantage offerings drop as it raised premium prices, but it did so to get the program on firmer financial footing for 2015 and beyond, Swift said.

“We had to reposition our Medicare product in the market,” he said.

Enrollment in Medicare Advantage fell by 31 percent, between Dec. 31 and the same date one year earlier, but Swift said he expects enrollment to begin to rise this year.

Overall, HealthNow membership fell by 7 percent from 428,856 in 2014 to 398,949 in 2015, driven by the decline in Medicare Advantage enrollment and as some longtime employer clients shift to a self-insured – not fully insured – model. In that case, HealthNow administers the account but the employees don’t count as HealthNow members. HealthNow membership has declined each year since 2011.

Swift, though, also pointed to the company’s reserves of $544.4 million, or 24 percent of its $2.25 billion in revenues – as a sign of security, he said, that was lacking for Health Republic Insurance, the health insurance co-op that went out of business last year.

“That really represents the power and strength of our company and our brand,” Swift said.

The regulatory filing also includes salary information for the company’s highest paid officers.

David W. Anderson, HealthNow’s president and CEO, earned $1.2 million last year in salary and compensation tied to the company’s performance in 2014. Swift earned $1.1 million last year and David A. Busch, the company’s senior vice president and chief sales officer, earned $560,200.

The parent company of Univera Healthcare also is filing its 2015 financial statement with state regulators Tuesday, and Independent Health will file its 2015 financial statement April 1.