Blue Cross & Blue Shield (BCBS) of Mississippi, the largest health insurance provider in the state, has received a rating of A- from the national insurance analysis and rating company A.M. Best.
BCBS of Mississippi covers about one million people in Mississippi, and employs 1,000. The company processes about 38,600 claims per day totalling payments of $15.7 million.
A.M. Best said its A- rating of BCBS of Mississippi reflects the company’s strong market position, good capitalization and improving profitability.
“A.M. Best acknowledges the company’s strong, mutually beneficial relationships with a significant portion of health care providers in the state,” A.M. Best said in a news release. “The company contracts with 78% of the physicians, and all of the acute-care hospitals in the state, which enables it to obtain favorable pricing for services purchased on behalf of groups and individuals.”
A.M. Best said profitability improved in 1998 after poor performance in 1996 and 1997 that was attributed to claims costs being significantly higher than anticipated. Improvement in 1998 reflected the company’s success in lowering its medical loss ratios by redefining benefit offers and by shifting reimbursement rates from an inpatient to outpatient basis.
“Increasing electronic submissions of claims and greater online access by providers has helped lower administrative costs,” A.M. Best said. “In general, the company has taken the necessary steps to support strong financial performance while strengthening its market positions. A.M. Best expects Blue Cross & Blue Shield of Mississippi to continue generating favorable operating results for the next few years.”
Premium revenues have increased by raising premium rates for both new and existing business. Enrollment has increased 64% since 1996. The largest new client is the State of Mississippi Health Insurance Plans contract awarded for a five-year period beginning Jan. 1, 1998.
Richard J. Hale, president and CEO of BCBS of Mississippi, said that the A.M. Best rating confirms the trust Mississippians have placed in the company.
“We are financially sound and well-positioned to protect them, now and in the future,” Hale said. “Blue Cross and Blue Shield of Mississippi has the financial strength that our customers deserve. This is important because when you family’s health is an issue, the health of you insurance carrier shouldn’t be.”
Hale said the rating carries significance because it is from a well-respected outside party, and is used throughout the insurance industry as a sign of a company’s strength.
Ratings by A.M. Best, which was founded in 1899, range from A++ to F based on a comprehensive and qualitative evaluation of a company’s financial strength, operating performance and market profile. The company said the purpose of the rating system is to perform a constructive and objective role in the insurance industry towards prevention and detection of insurer insolvency.
“By taking a proactive role in the companies that we rate, A.M. Best encourages prudent management practices, therefore improving the industry’s solvency and strength,” the company said.
Insurance professionals depend on Best’s ratings to determine the financial strength and operation of specific insurers, to evaluate prospective reinsurance accounts, and to compare company performance and financial condition. Ratings can influence agents selection of plans to market. And, in recent years ratings have also become an increasingly important factor in consumers’ decisions to purchase insurance.
A.M. Best said individuals and small groups are the “bread and butter” of BCBS of Mississippi and a major contributor to earnings. “The individual and small group segments have always been profitable and despite enrollment losses through which the company weeded out its unprofitable business, it has produced an underwriting gain,” A.M. Best said. “Although Blue Cross and Blue Shield of Mississippi is currently showing a profit in the segment, A.M. Best notes that the company may face challenges maintaining its current level of profitability given declining enrollment.”
The report on BCBS of Mississippi also said that the company has maintained its current market share by offering a broad spectrum of products. It also performs administrative services and processes claims for other Blue Cross & Blue Shield plans and for certain other programs, such as Medicare. A.M. Best said the company is well positioned to protect its market dominance in Mississippi.
About 15% of the enrollment of BCBS of Mississippi is to 53,000 individuals through self-funded programs. That segment has increased more than 40% since 1996. The company also pays claims for more than 25,000 federal employees and their dependents for an administrative fee, which represents more than 7% of total enrollment. The company has been increasing administrative charges to the point where these programs have become marginally profitable, A.M. Best said.
The rating also applies to the company’s subsidiary, Bluebonnet Life Insurance Company.
“The ratings of Bluebonnet Life reflects the company’s status as a strategic subsidiary of Blue Cross & Blue Shield of Mississippi, the historically profitable statutory earnings generated by its core group life insurance line, the conservative nature of its investment portfolio and the adequate capital level currently in place,” A.M. Best said. “Offsetting these factors are the company’s modest premium growth and limited scope of operations.”
Contact MBJ staff writer Becky Gillette at email@example.com.