PORTLAND — The state’s largest health insurer, Blue Cross and Blue Shield of Maine, is expected to lose about $30 million by the end of the year, according to financial records.
The company lost $25 million in the first nine months of 1997, and is expected to lose another $5 million by year’s end.
The losses are eating away at reserves the company sets aside to protect subscribers and handle claims.
However, the company and state insurance regulators say Blue Cross has enough money to cover the costs by its 470,000 members. The amount of money in reserves appears adequate to meet the costs, said Don Sirios, financial affairs director at the Maine Bureau of Insurance.
“Based on what we’ve seen, the company is taking prudent steps to address operating losses,” Sirois said.
The company is cutting jobs, entering new business ventures and raising premiums to reflect the real cost of service.
“We’ve been in a price war with competitors, and we’re calling a truce,” said Keith Vangeison, president of Blue Cross.
Financial trouble is nothing new to Blue Cross-Blue Shield. The nonprofit insurer lost about $11 million in 1996.
Behind the losses is an ongoing price war in southern Maine among Blue Cross and a handful of competitors: Healthsource Maine, Harvard Pilgrim Health Care, NYLCare Health Plans of Maine and Tufts Health Plan.
Price competition has been good for subscribers and employers that provide group health insurance. But low prices come at a time when health care costs are inching up.
“In order to hold onto market share,” Vangeison said, “we have to put prices in the marketplace that are inadequate to meet our costs.”
To compensate, Blue Cross is raising rates on many group plan renewals for 1998. Prices will go up an average 15 percent. The company is also trying to trim administrative costs.
The company eliminated 100 jobs at its South Portland headquarters in May. Another 60 positions were cut this month.
It will take about 18 months to turn the company around, said Vangeison, who expects losses to begin to moderate by the middle of next year.
“The coming months will tell whether our strategy is correct. We think it is,” Vangeison said.