Blue Cross Blue Shield plans are suffering along with the rest of the healthcare industry. According to a study by Sherlock, a health-plan consulting firm, the Blues saw operating income drop 18 percent in 2007, despite a 7.4 rise in revenue. That parallels the experience of other major insurers such as WellPoint and United Healthcare, which have seen money flowing out (for medical costs) much faster than it's been flowing in (from insurance premiums).
These results come, in part, because the [Blue] plans' revenues aren't keeping pace with medical costs. The plans' median premium-rate increase during 2007 was 5.4 percent, but median medical costs per member rose by 6.4 percent. What's more, administrative costs grew at a median rate of 7.6 percent per member. Meanwhile, insured membership among the plans fell by 1.4 percent, to 51.5 million, and operating margins dropped 1 point for 2007, to 3.3 percent.So it seems likely that the Blues, like other insurers, will be instituting big premium hikes this year. Of course, there's every chance that doing so could spark a healthcare death spiral, as rising costs price more and more people out of the insurance market.