The state’s largest health insurer is turning in one of the best financial performances in its industry, but may need to look to acquisitions to maintain its financial success, a new analysis indicates.
Health Care Service Corp., parent of Blue Cross and Blue Shield of Illinois, “has one of the highest earnings margins and commercial membership growth rates in the sector,” according to a new report from Moody’s Investors Service in New York.
The report indicated that Health Care Service’s key strength is its leverage of the Blues brand in the markets it operates. The company also owns and operates Blues plans in Texas and New Mexico.
“They are just a well run company, very conservatively managed, and put a quality product out on the street,” Stephen Zaharuk, vice president and senior analyst of Moody’s financial institutions group, said in an interview.
Health Care Service had 9.5 million health plan members as of June 30, an increase of 12 percent from 8.5 million a year earlier.
The company’s earnings from health insurance operations for the six-month period jumped 46 percent, to $407 million from $278 million, on premiums of $4.8 billion. Premiums increased 7 percent from $4.5 billion a year earlier.
“These ratings provide our policyholders and our members with third-party confirmation that our organization is financially sound and well-positioned to support and serve them for the future,” said Tony Rau, spokesman for Health Care Service.
Yet Zaharuk said the company’s “internal growth targets” cannot be achieved without additional acquisitions, a subject Health Care Service would not discuss publicly.
Neither Health Care Service nor Moody’s would disclose the insurer’s growth targets. “They do desire to grow,” Zaharuk said. “It is hard to see how they would hit those internal targets in the markets that they are in. They probably would have to seek acquisitions.”
The health insurance industry has been swept by mergers and buyouts in the last two years, especially among Blue Cross and Blue Shield plans.
Publicly traded Blues plans Anthem Inc. of Indiana and WellPoint Health Networks Inc. of California are working to finalize a deal that would create the nation’s largest health insurer, with more than 26 million members. That merger, announced a year ago, faces regulatory hurdles and it’s unclear when the deal will be completed.
Health Care Service is different because it is a mutual company owned by policyholders. Its executives in the past have pursued mergers and affiliations with similarly structured health plans.