Blue Cross Blue Shield of Michigan Reports 2025 Financial Performance
Blue Daily
| 13 min read
Following are remarks made by Andy Hetzel and Paul Mozak to the news media on March 2, 2026 as Blue Cross Blue Shield of Michigan reported its 2025 financial performance.
Andy Hetzel is Vice President, Corporate Communications, Blue Cross Blue Shield of Michigan.
Paul Mozak is Executive Vice President and Chief Financial Officer, Blue Cross Blue Shield of Michigan.
Kirk Roy is Senior Vice President and Chief Actuary, Blue Cross Blue Shield of Michigan.
Andy Hetzel: Good morning, everyone. Thanks for taking the time to be with us to discuss our company’s financial performance for 2025.
Paul Mozak will be joining us in a moment to cover our 2025 performance in greater detail. His position is executive vice president and chief financial officer. Paul will be discussing our finances on a consolidated basis under Generally Accepted Accounting Principles, or GAAP. You have many of the details in the news release we’ve provided.
The GAAP financials provide a complete, all-inclusive picture of the performance of the Blue Cross Blue Shield of Michigan enterprise. As a nonprofit mutual, Blue Cross has subsidiaries and lines of business outside of commercial health insurance. We also have investments that typically generate substantial income that we use to maintain very low margins on our health insurance business. These are included in the GAAP financials we will review with you today, along with the performance of our core health insurance business.
Our president and CEO, Tricia Keith, began 2025 warning of the significant upstream cost pressures affecting health insurance pricing in Michigan. Medical costs rising well above inflation for many years, coupled with skyrocketing prescription drug costs and emerging drug therapies with list prices in the hundreds of thousands of dollars are national trends that are being felt here in Michigan. These trends in higher upstream costs impacted our customers in 2025, with Blue Cross passing them along in the form of higher prices for our health insurance plans to our fully insured customers in the employer group and individual markets.
These pricing changes brought our revenue closer to our claims expense in 2025 – thereby positively affecting our financial performance. But they also continued to exacerbate the affordability crisis facing our customers and members.
As Paul Mozak will explain, even with rate increases, our health plan pricing continued to lag behind the cost of delivering needed health care services to our members in 2025.
To be very clear, we do not see it as sustainable to continue passing along higher prices for hospital care, medical care and drugs to our insured customers and members year after year. We are managing through an affordability crisis caused by these upstream medical price increases, and employers and families in Michigan are finding themselves strained to continue to pay for health insurance. If health insurance is to remain affordable, we must work together successfully with hospital systems, physicians and others to manage upstream cost pressures and promote optimal health for the people we collectively serve.
For Blue Cross Blue Shield of Michigan, 2025 was the fifth straight year our company paid more for health care than we earned in premiums. For every premium dollar Blue Cross took in last year, we paid out almost $1.02.
Across millions of claims, the continuing nature of this trend is unsustainable. And the result is unacceptable to the people and employers we serve – whose budgets are being challenged by health insurance costs increasing by double digits.
Health care prices, combined with surging use of an expensive system, continue to be the primary drivers of higher health insurance costs. Kirk Roy is joining us on today’s call to answer your questions about these trends. Kirk is our senior vice president and chief actuary.
In total, Blue Cross Blue Shield of Michigan experienced a $2.6 billion increase year-over-year in medical and pharmacy claims expenses in 2025 and will report a financial loss for 2025.As Paul will explain in further detail, we experienced our fifth consecutive year of underwriting losses.
These increases and cost pressures are being felt by our members and customer groups through higher premiums because health insurance costs are the end of the equation.Upstream in the equation are the unregulated prices charged by the prescription drug industry, expensive medical prices charged by health care providers, and a population that is managing through more complex and costly care situations and using medical care at some of the highest levels we’ve seen. Health insurance rates are pressured as a result.
We expect pressures on insurance premiums to continue in 2026 – but Blue Cross retains a strong financial foundation and credit rating, and we are making significant inroads in addressing the cost concerns of our customers.
The cost of running our own business – including executive and staff compensation – is 8 cents of every health insurance premium dollar.As our members and customers feel the enormous cost pressures of health care on their budgets, we have a responsibility to address our share of their cost burden.
Under Tricia Keith’s leadership, Blue Cross is taking disciplined and necessary steps to address our administrative costs while sustaining the quality of the products and services our customers expect.
We have achieved $420 million toward a target of $600 million in administrative cost savings over three years.
We have reduced executive level positions by a total of 17 since Tricia Keith was named President & CEO by the Board of Directors
We trimmed executive compensation in 2025 through one-time actions taken to reduce annual executive bonuses.
We have reduced the size of our workforce by more than 1,300 total positions through a combination of voluntary retirements, involuntary actions and the elimination of open positions.
As our President & CEO has been saying for the last year, we can’t solve the health care affordability crisis alone. We need our partners in health care – providers and drug makers especially – to recognize the health insurance affordability challenges faced by the people we collectively serve – and join us in achieving system-wide solutions.
We’ve mentioned before Blue Cross’ role as a major economic engine of our health care economy. In 2025, Blue Cross and our subsidiaries paid an average of $107 million per day for the care and benefits of members in Michigan and around the nation. This is $7 million more per day than 2024 and $19 million more per day than two years ago. This rapid acceleration of claims expense illustrates the impact of the medical and drug price increases that are pressuring downstream health insurance costs in Michigan and nationwide.
In 2025, we reached long-term payment contracts with eight Michigan hospital systems – including two of the state’s three largest systems – that include value-based payment components.This will enable Blue Cross to better partner with hospitals to align payment to patient outcomes and improve the quality, safety and efficiency of medical services in Michigan. At Blue Cross, we are optimistic in our ability to continue to work in partnership with health systems to negotiate payment that is fair, aligned to outcomes and responsible given the health care cost pressures facing Michigan families and employers.
We want Michigan’s hospitals to be successful. We also want them to acknowledge the affordability pressures people are facing when negotiating payment terms with Blue Cross.
We also achieved great success in slowing the impact of pharmacy costs through the introduction of biosimilar drugs that are saving our commercial members 90 percent on the cost of specific therapies.
Finally, despite the financial pressures we have been discussing, Blue Cross recognizes the critical importance of giving back to promote the health of everyone in Michigan. We will continue our longstanding commitment to the Michigan Health Endowment Fund in 2026 – paying the next installment of $100 million to the Fund in April – furthering our ongoing commitment of $1.56 billion to the fund over an 18-year period. The Fund enables important work at the community level across Michigan to promote health and wellness for residents – and Blue Cross is proud to enable its mission.
Now I’ll turn the call over to Paul Mozak. Paul is executive vice president and chief financial officer for Blue Cross Blue Shield of Michigan.
Paul Mozak: Thank you Andy, and good morning, this is Paul Mozak. I’m going to provide commentary on Blue Cross Blue Shield of Michigan’s 2025 financial results.
In the news release you received, we provide you with financial numbers that will appear in our audited statement, to be published in May in the company’s annual report using Generally Accepted Accounting Principles.
At the end of the news release, there is also information about financial results from our statutory filing with the State of Michigan. There are different accounting standards between statutory accounting and generally accepted accounting principles, so these two methods calculate our financial performance differently. GAAP accounting – our primary focus of today’s briefing – shows the full enterprise financial picture. As Andy explained earlier, we are a multi-company enterprise operating nationally in multiple lines of business.
As a nonprofit mutual, Blue Cross purposely promotes health insurance affordability, first and foremost, by working hard to keep our profits in the low single-digit range. There are three primary areas of income that are important to meet this objective – revenues from our health insurance business; revenues earned by our diversified subsidiaries; and investment earnings.
Over the last 10 years, Blue Cross’s average operating margin has been marginally negative, averaging negative 1.0 percent of revenue. Simply put, we have not been profitable on the health insurance side of our business. The small positive margin we would have preferred has been affected by the past five years of health care cost pressures Andy addressed earlier.
In a time of continuing, rapidly rising medical and prescription drug claims expenses, Blue Cross Blue Shield of Michigan managed significantly improved financial performance in 2025 compared to 2024.However, we continued to experience tremendous claims expense pressures due to significantly higher medical utilization within an expensive health care system, along with skyrocketing prescription drug prices.
Despite these challenges, we have remained a trusted partner to our members, customer groups and providers, continuing to provide access to high-quality health care. We are grateful for the trust our members and customers place in us.
Overall, Blue Cross experienced an underwriting loss of $975.5 million on our core lines of business in 2025, resulting in a negative operating margin of -2.3 % for the year.
Our conservatively invested portfolio of stocks and bonds generated a positive return of $641 million on a GAAP basis, helping to offset the impact of skyrocketing health care costs on our underwriting performance.
While strong investment results contributed to the bottom line, they could not compensate for total underwriting losses on our core health care business. In total, after paying out $2.6 billion more for medical and pharmacy services for our members in 2025 than we did in 2024, Blue Cross experienced a bottom-line loss of $246 million on enterprise revenue of $43.3 billion for the year.
This is a significant improvement in financial performance year-over-year. When combined with our strong credit rating, solid financial foundation, pricing adjustments and success in our internal cost reduction initiatives, we are confident in our ability to serve our customers and bring our financial performance back to small positive margins in the years ahead.
As Tricia Keith has said, we need to partner effectively to solve for the cost escalation we’ve seen in health care over the past decade.
Our financial results for 2025 continued to be impacted by massive industry cost pressures. Here are some examples:
In 2025, Blue Cross experienced a $2.6 billion increase in total medical and pharmacy claims expense compared to 2024. Of this increase, $2.4 billion was attributable to medical claims, with an additional $200 million driven by pharmacy. Cumulatively, over the past two years, medical and pharmacy claims expenses have risen by $5.6 billion for Blue Cross, which equates to an increase of $1,100 per member.This underscores the sustained and accelerating pressure on health care costs.
Cost and utilization trends in 2025 remained meaningfully above historical levels across all lines of business. These pressures were broad-based, reflecting both higher unit costs and increased service utilization.
The $2.4 billion increase in medical claims expense was driven by elevated spending across all major service categories. Notably, higher trends were observed in surgery, emergency room and observation services, and professional services across the full book of business. We also saw a pronounced increase in inpatient utilization as well as post-acute care services, further contributing to overall cost growth. In addition, behavioral health services continued to experience double-digit utilization trends in 2025.
Beyond service-level medical trends, population dynamics are also a factor. The membership continues to age, and we are observing a higher prevalence of chronic and complex conditions, resulting in greater clinical severity. Underlying these medical trends is an increase in the use of higher-cost, complex treatment for conditions within a population, continuing to place pressure on upstream health care costs.
For pharmacy claims, the company experienced an increase of $200 million in 2025. Following a significant rise in pharmacy claims in 2024 of $900 million, Blue Cross implemented several targeted pharmacy cost-management strategies designed to mitigate further acceleration in trend. These actions included the successful introduction and adoption of biosimilar alternatives to high-cost specialty drugs such as Humira and Stelara. As a result of these interventions, commercial pharmacy spending was held relatively flat in 2025 — representing a significant milestone in protecting affordability for members and employer groups amid a challenging cost environment. On average, the biosimilars cost approximately 90 percent less than their branded counterparts. Adoption has been strong, with well over 90 percent of eligible patients successfully transitioning to biosimilars with little to no disruption to care. Collectively, these efforts generated approximately $80 million in savings for members and customers in 2025.
Membership
I’d also like to touch on membership. Despite enormous affordability pressures, our members and group customers continued to choose Blue Cross for health insurance in 2025 – and our stable membership reinforces the value people place in having Blue Cross as their preferred health insurance partner. Overall, Blue Cross Blue Shield of Michigan continues to be the leading choice for health insurance among businesses and individuals in our state. Nationwide membership for BCBSM, Blue Care Network and Blue Cross Complete of Michigan totaled 5,143,961 at year-end 2025, a slight decrease of a tenth of a percent, approximately 3,600 members.
There are specific membership numbers in the news release you received.
Capital Position
Insurance industry regulators use a method called Risk Based Capital to measure an insurance company’s financial strength. Regulators want to be assured that an insurance company is financially stable and able to weather risks in the marketplace.
Our Risk Based Capital position was 476 percent in 2025. This level of RBC means that – despite the losses we have experienced recently – our company has the financial foundation to stand behind our members’ care.
Revenue
Our consolidated revenue, which includes Blue Cross and our subsidiary companies, totaled $43.3 billion in 2025, up from $40.6 billion in 2024.
Statutory filing with state
Those are our 2025 financial results based on GAAP. Now I’d like to address our statutory financial results.
Blue Cross has filed statutory-based accounting statements (SAP) with our Michigan regulators. As I mentioned before, these statutory numbers do not reflect a comprehensive view of BCBSM’s consolidated enterprise performance as a mutual company.
Under SAP accounting, Blue Cross posted a $193 million underwriting loss on SAP revenue of $4.4 billion in 2025, after reinsurance accounting.
BlueCross BlueShield of Michigan, a nonprofit mutual insurance company, is an independent licensee of the Blue Cross and Blue Shield Association. For more company information, visit bcbsm.com and MIBlueDaily.com. To learn more about our commitment to making health insurance more affordable, please visit MIBlueDaily.com/Affordability.
