For-Profit Subsidiaries Key to Nonprofit Insurer’s Finances

The Detroit Free Press reports that Blue Cross Blue Shield of Michigan managed to report positive net earnings for 2007 despite $245 million in losses on its individual insurance lines because of the financial strength of the nonprofit insurer’s for-profit subsidiaries.  According to the article, individual insurance lines are “those bought by adults without workplace coverage or to supplement Medicare coverage” and include both supplemental Medicare policies known as Medigap and conversion policies for individuals who once had workplace coverage.  The profitable subsidiaries included the workers’ compensation insurance provider Accident Fund and the dental plan provider DenteMax.  According to the nonprofit’s related press release, it’s almost $1.5 billion in monthly payments for medical and pharamacy claims makes it the largest payor for health care in the state of Michigan.  The company also attributes its positive 2007 net earnings in part to its investment returns.  The nonprofit noted its reserves had declined as measured against its risk exposure for the third straight year, but those reserves remained comfortably above the minimum capital requirement imposed by the Blue Cross and Blue Shield Association.  While a nonprofit corporation under Michigan law, Blue Cross Blue Shield of Michigan is not exempt from federal income taxes according to its 2006 financial statements, available on its website.

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