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Health insurers have healthy financial reports

Three of Western New York's major nonprofit health insurers performed better in 2017, each of them helped by gains in investments and lower administrative expenses.

Mark Johnson, Independent Health's executive vice president and chief financial officer, attributed a $22.4 million surplus, up from $13 million in 2016, to effective management of medical costs, reduced administrative expenses, and positive performance of investments.

"We have a variety of initiatives to manage medical cost trends, especially with primary care doctors," he said.

Independent Health highlighted its introduction of a value-based payment arrangement for primary care physicians; establishment of a new affiliate, Evolve Practice Partners, to help physicians make the transition to value-based reimbursement; and expansion of Reliance Rx, a third-party administrator for employee pharmacy benefits and specialty medications. Independent Health's affiliates, including Pharmacy Benefit Dimensions and Nova Healthcare Administrators, generated about $230 million revenue, the insurer reported.

Officials noted that membership remained steady at 365,080 enrollees despite uncertainty around the future of the Affordable Care Act and a decline of 20,000 members, mainly in the Medicare Advantage line of business.

Buffalo-based HealthNow New York, the parent company of BlueCross BlueShield of Western New York, finished with a $55 million surplus, up from $4.2 million in 2016, on revenue of $2.5 billion. It figured its operating margin of .51 percent based on total premium revenue and net underwriting gains, the difference between premiums collected and any claims or other insurance-related expenses incurred. This figure does not include investment income or federal taxes incurred. Calculated as total net income over total net revenue, the operating margin is 2.2 percent.

The company, which also operates a subsidiary in the Albany region, reported $44 million in investment gains and more than $20 million attributed to a “carry forward” from prior years, an accounting practice known as “premium deficiency reserve."

"We're pleased with the performance," said Stephen Swift, chief financial officer. "We demonstrated growth in membership and the strength of the organization in a challenging, volatile market."

Univera Healtcare is the local operation of Rochester-based Excellus BlueCross BlueShield. Excellus generated net income, or surplus, of $182.3 million last year, up from $99.5 million in 2016, on total premium revenue of $5.6 billion.

The company's net income percentage, calculated with investment gains and additional expenses, was 3.2 percent in 2017, the highest since 2011, according to Excellus. The company average has been 1.8 percent a year since 1998.

"Our goal is to earn annual net income of less than 2 percent of premium," Christopher Booth, chief executive officer, said in a statement.

"Achieving a margin is critical for the business to be financially healthy for the security of our members. New York has recently experienced what occurs when an insurer incurs losses and lacks adequate reserves," he said, referring to the disruptive financial collapse in 2015 of insurer Health Republic.

Other highlights from the companies' financial filings included:

Independent Health

  • Finished 2017 with total revenue of $2.02 billion and an operating margin of .61 percent – calculated based on total revenues and net underwriting gains.
  • This was the second consecutive annual surplus – it ended 2016 with a $13 million surplus – following deficits of $44 million in 2015 and $60 million in 2014.
  • The financial report includes results for Independent Health Association, which manages community-rated and government-sponsored programs, and ended the year with a $23.7 million surplus; as well as Independent Health Benefits Corp., which manages experience-rated contracts, and ended with a $1.3 million loss.
  • Five highest-paid employees, including salary and bonus: Dr. Michael Cropp, chief executive officer, $1.3 million; Mark Johnson, chief financial officer, $839,455; John Rodgers, chief operating officer, $528,930; Dr. Thomas Foels, chief medical officer, $445,492; and Jill Syracuse, chief servicing officer, $410,150.

BlueCross BlueShield of Western New York

  • Reserves for the company, which come from net income gains, stood at $612 million at the end of the year.
  • HealthNow saw year-over-year membership growth in Medicare Advantage – up 9 percent – and Medicaid – up 33 percent. It also experienced growth in self-funded membership.
  • In the Buffalo and Albany regions, the company has 398,000 insured members, and about 600,000 people in self-funded plans or in companies based outside the region with Blues memberships.
  • Membership growth led to $173 million in increased year-over-year revenue. But this was largely offset by year-over-year hospital cost increases of $85 million, pharmaceutical cost increases of $32 million, and specialist cost increases of $17 million.
  • Five highest-paid employees: David Anderson, chief executive officer, $1.76 million; Steve Swift, chief financial officer, $961,800; David Busch, chief sales officer, $698,809; Dr. Thomas Schenk, chief medical officer, $673,078; and James Bartolomucci, chief risk officer, $653,203. Forty-six other employees earned total compensation of $160,000 or more.

Univera Healthcare/Excellus

  • Reserves at the end of 2017 were $1.4 billion, up from $1.2 billion in 2016.
  • Excellus, with 1.5 million members, including nearly 70,000 in Univera, reported that it achieved a higher net income than expected, attributing this to lower than anticipated medical expenses, lower administrative expenses, and favorable investment income. This includes a $40.1 million loss sustained after getting out of the primary care business, including the closure of three Lifetime Health Medical Group centers in the Buffalo area at the end of 2017.
  • Net investment gains amounted to $93.7 million compared to $23.3 million in 2016. General administrative expenses decreased from $504.7 million in 2016 to $354.7 million.
  • Five highest-paid employees in 2017: Christopher Booth, chief executive officer, $2.36 million; Dorothy A. Coleman, chief financial officer, $1.19 million; Stephen Sloan, general counsel, $933,488; Barry Thornton, senior vice president, $646,062; and James Reed, senior vice president, $639,976. According to its financial report, 164 additional employees earned $160,000 or more.
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