CHICAGO--(BUSINESS WIRE)--In contrast to publicly traded health insurers, Fitch Ratings expects full year 2015 earnings for the Blue Cross and Blue Shield Companies (BCBS) to decline, according to a new report. Earnings declines for the BCBS companies reflect key challenges including concentrated geographies, generating adequate capital while maintaining nonprofit status, adding scale and operational efficiency as well as unfunded pension plan obligations.
"Earnings declines, lower enrollment and moderate revenue growth were challenges for the Blue Cross and Blue Shield companies, however, Fitch believes earnings are likely to improve in 2016 due to premium rate increases and benefit redesign aimed at improving underwriting results and regulatory changes," Mark Rouck, Senior Director, Fitch.
Of the 35 BCBS companies, 23 reported a collective $1.9 billion decline in earnings for the first nine months of 2015 and 16 reported net losses. Individual results vary, but Blue Cross and Blue Shield of Michigan ($622 million), Health Care Service Corp. ($442 million) and Highmark Group ($266 million) were the biggest contributors to the year-over-year decline.
In Fitch's view, cost and utilization trends from the state insurance exchanges from the Affordable Care Act have been higher than anticipated and are the primary drivers of declining earnings. In addition, the BCBS companies are challenged by the balance between their non-profit status and the need to make adequate and efficient investments in their business.
Fitch estimates the BCBS Companies' health business enrollment (based on statutory filings) at 72 million and views the companies' rights to use BCBS trademarks and copyrights as significant competitive advantages, however.
The full report 'Blue Cross and Blue Shield Companies: Credit Overview' is available at 'www.fitchratings.com' and at the link below.
Additional information is available at 'www.fitchratings.com
Blue Cross and Blue Shield Companies: Credit Overview