AM Best downgraded the outlook for Blue Cross Blue Shield of Michigan from stable to negative based on a "sharp deterioration" in underwriting and operating income.
In a Dec. 3 news release, AM Best, a credit rating agency specializing in insurance, said the decline in underwriting performance was driven by higher utilization across BCBS Michigan's business.
Here are five things to know:
- Pent-up demand for surgeries after the COVID-19 pandemic and high demand for GLP-1 drugs and autoimmune therapies were the major causes of the losses. Medicare Advantage risk-adjustment changes and rising acuity in Medicaid also contributed to the losses.
- BCBS Michigan reported a $3.2 billion increase in medical costs in 2023 compared to 2022.
- The company has made significant efforts to improve its performance, according to AM Best, including right-sizing its workforce. The company laid off 64 employees in August as part of an effort to reduce administrative costs.
- BCBS Michigan will also end coverage for GLP-1 drugs for weight loss in its largest commercial plan at the beginning of 2025. The company cited concerns about safety, effectiveness and cost as the reasons for the decision.
- "AM Best maintained BCBS Michigan's financial strength rating and long-term issuer credit ratings of 'A,' or 'excellent.' The company has a strong balance sheet and adequate operating performance, according to AM Best.
In a statement shared with Becker's, BCBS Michigan said the negative outlook can be attributed to challenges facing the industry as a whole.
"Economic factors driven by rapidly increasing medical and pharmacy costs have had an ongoing negative impact on our business and have impacted the financial rating outlook," the company said. "These challenges are not unique to Blue Cross and are being faced by health plans throughout the country as we work diligently to maintain health care affordability."
The overall rating is a reflection of the work BCBS Michigan is doing to respond to headwinds, the company said.
"It is a reassurance to our members and customers, who value a company that demonstrates financial strength and a continuing commitment to meet their needs," the company said