When Michael Guyette was plucked to be the new CEO of Blue Cross and Blue Shield of Minnesota in 2012, the native Rhode Islander opined to the Pioneer Press' Christopher Snowbeck, "To me, health care is local. You have to be very connected on a local basis with your providers and your community."
Today, the Minnesota Department of Commerce releases the 2016 premium rates for Minnesotans who buy individual health insurance policies. Earlier this year, Guyette's nonprofit was among the state's carriers proposing eye-popping hikes, pitching increases north of 50 percent.
Blue Cross explained the jump by claiming it lost $135 million last year in the market for individual policies. Omitted was context.
Blue Cross employed about 3,600 people when Guyette took over. A year prior, its parent company reported earnings of almost $172 million. Guyette's inaugural 12 months as the top exec translated into serious cha-ching, pushing the company $50 million into the black.
“I am pleased to report that operating results for 2013 out-performed 2012, indicating a strong trend towards greater stability,” said Guyette.
The following year was even better, with earnings approaching $62 million.
Like all of Minnesota's nonprofit health providers, Blue Cross isn't allowed to call profits "profits." Cash earned goes into a pot of capital reserves. It's a matter of semantics.
State law requires the likes of Blue Cross, UCare, and Medica to maintain a minimal level of capital reserves to ensure solvency if they're hammered by sick people's claims. Historically, the yardstick has been between less than two to as many as four months' worth of expenses. However, there's no cap on the pile of cash these insurers can amass.
In 2012, Blue Cross boasted reserves of $827 million when all it was legally required was $118 million, according to a 2014 state Department of Health report. In other words, Blue's financial war chest was 700 percent more than it needed to be.
But what good is 700 percent when you can always stockpile more? Especially when you can whack that pesky group of expenses known as "workers."
A few months ago, Blue Cross announced it would ax 450 IT jobs, or about 13 percent of the current workforce, starting next year and into 2019.
Pink slips were necessitated "to have the right structures in place," the nonprofit explained.
At the same time, Blue Cross' capital reserves rose 112 percent from 2003 to 2012.
Company execs benefited handsomely. The most recent salary reported for Guyette was almost $2 million. That was two years ago. A platoon of execs also earn well into six figures, including two treasurers paid $560,000 and $700,000, respectively, in 2013.
A 2014 Strib story by Lee Schafer quoted Guyette saying he was “having the time of my life.”
Minnesotans get to pay for it.