Independence Health Group Inc., the nonprofit holding company for Independence Blue Cross and other businesses affiliated with the Philadelphia region’s largest health insurer, on Monday reported a decline in annual net income for the third year in a row.
The drop, to $69.18 million last year from $142.64 million in 2013, came despite a 19 percent gain in revenue, to $13.2 billion, and the addition of two million members to Independence’s operations in 25 states.
Independence officials attributed the decline in net income to taxes and fees related to the Affordable Care Act as well as investments in technology and partnerships, such as Tandigm Health, a joint venture to help manage the quality and costs of care provided by participating primary-care doctors.
“As we plan for ’15, ’16, and ’17, you will see an uptick in our net income. We’re up and running on the ACA. We’ve done the things we needed to do,” president and chief executive Daniel J. Hilferty said.
Alan Krigstein, executive vice president and chief financial officer of Independence, said the company spent $40 million to be ready for the act in 2013 and an additional $20 million to $25 million last year.
The spending paid off in 2014 with the addition of 285,000 individuals in Pennsylvania and New Jersey buying Independence Blue Cross policies through the exchanges established to implement the act, Krigstein said.
On the downside, ACA fees and taxes totaled $204 million, he said.
Independence’s overall gain of two million people on its customer rolls included its Medicaid managed-care company and its pharmacy-benefits management firm, which focuses on government markets.
The 30 percent increase in customers was much bigger than in 2013, when Independence added 550,000 people.
Hilferty said the new holding company, Independence Health Group, was created, with the encouragement of the Pennsylvania Insurance Department, to streamline the corporate structure of the 76-year-old company.
The new structure could help accommodate growth, including the possible consolidation of Blue Cross-Blue Shield companies under the Independence umbrella, Hilferty said.
“There might be an opportunity to more easily bring other Blues in under the Independence Health Group name,” he said.
Date: April 6, 2015