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News of the Day ... In Perspective

8/23/2005

BlueCross BlueShield of Tennessee criticized for $1 billion in reserves

Tennessee’s largest health insurer has posted profits four years in a row and now has twice as much in reserves as legally required. BlueCross BlueShield is planning to spend $200 million of its reserves to build a new corporate headquarters overlooking Chattanooga.

According to Russ Miller, senior vice president of the Tennessee Medical Association, the company’s fiscal fitness “just sticks in the craw of the doctors.” The TMA recently lost a lawsuit that accused BC/BS of “numerous unfair and deceptive acts” intended to deny, defer, or decrease payments to physicians.

BC/BS covers half the 5.9 million population of Tennessee and, unlike Aetna and Cigna, participates in TennCare—a venture that publicly traded companies avoid.

Spokesman Bill Steverson noted that in 1970, BlueCross had enough money in reserves to pay claims for 178 days, but today its reserves would only last 57 days because of the increased cost of medical services.

In 2004, BC/BS of Tennessee had a pre-tax profit margin of 12.4%, third highest of 31 Blues tracked by national BlueCross. The average was 6.2%. Cigna, one of the largest for-profits, had a margin of 13.1%.

“We feel comfortable about how we’re regulated by the Department of Insurance here,” said CEO Vicky Gregg. “It hasn’t been an impediment to doing business and taking care of customers” (Tennessean 8/14/05).

Additional information on TennCare:

Congressional testimony of Dr. Robert Berry

AAPS News March 1994, May 2004

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