Excellus BlueCross Blue Shield saw a sharp rise in medical and prescription drug benefits last year, paying out nearly $7 billion in claims.
Hospital and related medical benefits have been steadily climbing. But two years of declining medication expenses were all but erased last year, as Excellus recorded “higher utilization and rapid growth in specialty drugs such as those used to treat inflammatory conditions.”
“Rising health care costs are straining health insurers across the country,” the Rochester-based company said in a news release accompanying its annual report filed this week with the New York state Department of Financial Services. "These pressures are also impacting regional health plans."
The region’s largest health insurance provider spent $19 million a day, on average, on member benefits — a 16% increase from the previous year, and the largest year-over-year percentage increase in two decades.
Much of that increase was reportedly driven by higher claims costs for Medicare Advantage members. Inpatient admissions and hospital patient days both increased, records show, with a member mix that is growing increasingly older.
When it comes to the rise in prescription drug costs, Excellus also points to increasing use of GLP-1 medications, which treat Type 2 diabetes and obesity. Expenses have rebounded back to near 2022 levels, when Excellus was seeing greater utilization of biologics and gene therapies, and before members on Medicaid and related programs shifting to the state’s Medicaid pharmacy program.
“Costs are also increasing as newer treatments improve outcomes but come with higher price tags," a spokesperson said in an emailed statement. "These innovations are important and often life‑changing, but together they’re driving spending upward.”
The health plan represents more than 1 million people across Upstate New York, and, along with parent company The Lifetime Healthcare Cos., employs 4,000.
Excellus raised rates in 2025, pointing specifically to hospital costs, and collected $7.5 billion in premiums, records show. Of every dollar collected, the company said, 92 cents pays for medical care — well above what’s required by federal law — with the rest going to taxes and operating expenses.
The company reported $150 million in profits — the highest since before the COVID-19 pandemic — despite recording a six-figure operating loss for the third-straight year.
Stock dividends and significant capital gains more than erased the losses. The net margin aligns with the nonprofit’s target of 2%. That net income is then put into reserves, the company said, to buffer against unexpected spikes in costs as were seen during the pandemic.
“The health plan is a well-managed, local company that keeps its margins modest on purpose,” Excellus board chairperson Ty Muse said in a news release. “This approach helps ensure long-term financial stability and allows the health plan to direct as much of each premium dollar as possible to medical care.”
Excellus CEO Jim Reed’s total compensation stood at $4.49 million, up from $3.97 million a year ago. Pay raises, bonuses and other payments fueled an overall 10% increase in total compensation for the Rochester-based company’s 10 highest-paid executives.
Bonus pay is tied to corporate and performance goals for the previous three years, the company has said, including member satisfaction metrics and quality scores for the health plan’s products.
Reed took the reins in May 2021, after having served as president and CEO-elect since July 2020. He has been with the company since 1996.
