$19.2M paid to CEO of Blue Cross Blue Shield of Michigan

Breana Noble
The Detroit News
Blue Cross Blue Shield of Michigan CEO Dan Loepp

Blue Cross Blue Shield of Michigan CEO Daniel Loepp made $19.2 million in 2018, a 43 percent hike from the previous year.

His total compensation was made public Friday as the nonprofit Detroit mutual health insurer reported its second-highest profit in the past decade.

For a fifth year, Loepp's base salary remained flat at $1.5 million, but a bonus based on annual and long-term goals established by the company's board rose more than 50 percent to $16.2 million. He also received $1.4 million in other benefits including a car allowance and life insurance.

That puts Loepp in the top five highest-paid Blue Cross CEOs, said Andy Hetzel, Blue Cross' vice president of corporate communications. The Michigan company is one of the largest.

"Mr. Loepp is running a great business," Hetzel said. "We think he earns the money he makes."

Blue Cross Blue Shield of Michigan reported a net income of $580 million, according to its annual financial statement released Friday. It is a more than 30 percent decrease from 2017 after advanced record federal tax breaks spiked profits by $550 million in 2017 and the company paid $150 million in additional income taxes in 2018.

Revenue, however, rose 9 percent to $29.3 billion as some premiums increased.

BCBSM recorded a net underwriting gain of $194.1 million in 2018, a more than 70 percent year-over-year increase.

Michigan enrollment grew with the addition of 89,577 members, a 2 percent increase to more than 4.7 million. National membership dropped for the first time in seven years, however, from 5.4 million to 5.34 million. Three states outside of Michigan saw decreasing enrollment, company spokeswoman Helen Stojic said.

"We are achieving membership gains that will help us improve our customers’ experience to provide health insurance products that improve our members’ lives," said Paul Mozak, BCBSM senior vice president of finance and chief risk officer.

Individual plans totaled 219,000 after premiums increased on average 1.1 percent on health maintenance organization plans, which represent 75 percent of its membership, and 4.2 percent on preferred provider organization plans.

Another 22,171 patients from employers with 50 or fewer employees increased the company's small group membership to its highest level since mid-2014. On average, insurance premiums rose 2 percent for these customers in 2018.

Since 2015, rates overall have increased by 0.1 percent, the company noted.

"That should be an indication from us to the small employers in Michigan that we are determined to keep their health care costs affordable and consistent," Hetzel said. "We feel they value predictability, manageability and moderation."

BCBSM also reported its for-profit subsidiary, Lansing-based workers' compensation firm AF Group, posted a net income of $187 million, a 68 percent rise.

On operations, Blue Cross generated $605 million for a 2.1 percent operating margin. Service costs rose 11 percent to $16.4 billion.

The company completed a restructuring in 2018 in a move that saved $360 million over the past three years and has kept administrative costs nearly flat over that time, Hetzel said.

BCBSM also expects to contribute $85 million to the Michigan Health Endowment Fund, bringing total contribution over the past five years to $440 million of its required $1.56 billion. State legislation created the nonprofit community health investment fund in 2013 when Blue Cross converted into a nonprofit mutual health insurer.