Independence Blue Cross and related companies last year spent significantly less on hospital, doctor, and pharmaceutical bills for its members, resulting in higher profits for the year.

Independence, the largest health insurer in the Philadelphia region, said Tuesday it spent 81.5 cents of every premium dollar on medical bills in 2018, down from 86.4 cents on the dollar in 2017. Officials attributed the improvement to contracts with hospitals and health systems that reward quality rather than volume of care and efforts to educate consumers about where they can get better care for less money.

“It is certainly a meaningful improvement,” said Gregory E. Deavens, chief financial officer of Independence Health Group, the corporate parent of Independence Blue Cross, AmeriHealth Caritas, and other operations.

That is good news for area residents who receive their health insurance through Independence: The lower medical expenses last year lead to lower premiums this year, Independence officials said.

Daniel J. Hilferty is president and chief executive of Independence Health Group.
Independence Health Group
Daniel J. Hilferty is president and chief executive of Independence Health Group.

While the insurance premiums collected by Independence fell 1.1 percent as more corporations opted for self-insurance, the medical claims incurred by Independence on behalf of fully insured customers fell by 6.8 percent, the company reported. That was a big driver of the increase in net income to $324 million last year from $77 million in 2017, when earnings were held back by large reserves for unusual items.

Total revenue was $16.28 billion, down less than 1 percent from $16.41 billion the year before. The company employs more than 10,000, including 6,300 in Southeastern Pennsylvania.

Last year, Independence had 320,000 individual members in Affordable Care Act plans in Pennsylvania and New Jersey, up from 300,000 in 2017.

Talk of Medicare for All by Democratic presidential candidates and other politicians has sent shock waves through publicly traded health-insurance sectors, but Independence chief executive Daniel J. Hilferty put long odds on the idea.

“It’s very doubtful that either the Republicans or the Democrats will be able to make significant change in the current system,” Hilferty said. He said any large-scale changes to the health-care system should involve the best of the public and private sectors.