Service. Integrity. Community. blue cross and blue shield of kansas annual report to policyholders and members

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1 Service Integrity Community blue cross and blue shield of kansas 2012 annual report to policyholders and members

2 Statement of Licensee Blue Cross and Blue Shield of Kansas is licensed by the Blue Cross and Blue Shield Association to offer certain products and services under the Blue Cross and Blue Shield brand names within the company s own geographic service area all Kansas counties except Johnson and Wyandotte. Blue Cross and Blue Shield of Kansas is an independently licensed company governed by its own board of directors and is solely responsible for its own debts and other obligations. A copy of the company s most recent audited financial statement is available on request to Steve Morris, (785) or steve.morris@bcbsks.com. Neither the Association nor any other organization using Blue Cross and Blue Shield brand names acts as a guarantor of Blue Cross and Blue Shield of Kansas obligations. The Blue Cross and Blue Shield system of individual Plans is not a single company but an association of independent companies.

3 A Message from our President As Blue Cross and Blue Shield of Kansas marked 70 years in business during 2012, we were given both the opportunity to reflect on our long tradition of Kansans serving Kansans while receiving clarity regarding the future of health care in our country. Through our reflection on the past, we were reminded that our company has weathered even thrived in other periods of significant change within our industry. This knowledge provides us considerable confidence that our future is bright. During 2012, the Patient Protection and Affordable Care Act (ACA) was affirmed as the law of the land, assuring that our ongoing efforts to be in compliance with the law would continue to move forward. Commitment to Kansans remains constant through 70 years When Sam Barham moved his young family from New York to Topeka in 1942 to become the first executive director of the start-up Blue Cross of Kansas, he brought with him a firm commitment to service, integrity and community. Today, those commitments are his legacy as they continue to define who we are as a company and the daily efforts of our 1,450 employees. Providing superior service to our members and contracting providers is a daily goal of our employees, and one for which they are proud to be recognized. In 2012, Service Quality Measurement Group (SQM) reaffirmed our designation

4 as a World Class Certified Call Center and presented us with our sixth straight Highest Customer Satisfaction Award for the health care industry. Our national association again recognized our achievements in working with providers with the BlueCard Provider Satisfaction Award for highest system-wide results. Our employees processed in excess of 16.5 million claims for Kansans totaling $2,109,500,300 paying most claims in just a few days. Those payments to health care providers were in addition to nearly $145 million we contributed to the economy in the form of payroll and taxes. We operated our business on 9 cents of a premium dollar, meaning 91 cents went to pay claims or build claims reserves for the future. We also made great strides during 2012 to prepare for new ways to sell our products and serve our members. These changes require additional investment in our technical infrastructure, including opening new communications channels with our members, such as the Facebook page we debuted in In addition, our employees continued to explore new payment models that could change the way we reimburse providers moving from a fee-forservice model to one that rewards quality outcomes while also developing new educational and support programs that will help members achieve better health. The longevity of our company is a testament to our ability to operate with integrity and business ethics. During the course of all our daily business activities we strive to fulfill our mission: Being the insurer Kansans trust with their health. This relationship of trust was seven decades in the making and is one we intend to foster for decades to come.

5 Mr. Barham is credited with starting our long relationship with United Way, a tradition carried on by current employees who, along with the Blue Cross and Blue Shield of Kansas Foundation, pledged $242,673 to United Way organizations in Topeka, Wichita, Salina and Hutchinson. In addition, our employees generously provided financial support to many organizations, including Projects Topeka and Salina, March of Dimes and Relay for Life, while also giving countless volunteer hours to the organizations most important to them. The BCBSKS Foundation disbursed $615,900 in 2012, helping charitable entities and schools fund programs aimed at promoting health improvement, health care access, health education, healthy behaviors and prevention initiatives. Moving forward with confidence Today, Blue Cross stands on the brink of a new horizon. I am confident in this: Blue Cross and Blue Shield of Kansas will move forward in this new marketplace as we have for the past 70 years. We will continue to offer Kansas businesses of all sizes and individuals of all ages health insurance products. We are, at our core, a health insurance company and that will not change. Moving forward, our goal is simple: We want our members to get the best possible health care at the lowest possible cost. We want to ensure that their health insurance works for them and their families, providing them with the safety and security they have come to expect from Blue Cross and Blue Shield of Kansas. Andrew C. Corbin President/CEO Blue Cross and Blue Shield of Kansas

6 Blue Cross and Blue Shield of Kansas, Inc. Condensed Consolidated Balance Sheet December 31, 2012 and Assets Cash and Investments $1,357,251,119 $1,227,990,066 Premiums and Other Receivables 62,236,772 53,603,523 Property and Equipment, Net 76,686,244 76,376,957 Investments in Subsidiaries * Other Assets 126,635, ,340,600 Total Assets 1,622,809,780 1,500,311,146 Liabilities Claims Incurred and Unpaid $239,913,269 $233,073,724 Premiums Received in Advance 143,466, ,023,530 Accounts Payable and Other Liabilities 368,733, ,373,935 Total Liabilities 752,113, ,471,189 Policyholders Reserves 870,696, ,839,957 Total Liabilities and Policyholders Reserves $1,622,809,780 $1,500,311,146 As derived from the audited financial statements of Blue Cross and Blue Shield of Kansas, Inc. * Investments in subsidiaries of $45,378,379 and $43,059,670 for 2012 and 2011 respectively, are eliminated for consolidated financial statements.

7 Board of Directors (As of Dec. 31, 2012) Officers Gary D. Shorman, chairman, Hays President/CEO, Eagle Communications, Inc. Steve W. Sloan, vice chairman, Pittsburg President/CEO, Midwest Minerals, Inc. Andrew C. Corbin, Topeka President/CEO, Blue Cross and Blue Shield of Kansas Members James M. Alley, III, D.D.S., Wichita Oral and maxillofacial surgeon Leon J. Boor, Abilene Administrator, Memorial Hospital (retired) Leonard R. Hernandez, Wellington President/CEO, Sumner Regional Medical Center Robin R. LacKamp, Rose Hill Vice president and director of human resources, American State Bancshares, Inc. Diane L. Lee, CPA, CSEP, Hutchinson Swindoll, Janzen, Hawk and Loyd, LLC Steven D. Marsh, Wichita Steven D. Marsh, CPA, Chartered Edward J. Miller, Iola Apparel manufacturer (retired) Louis E. (Gene) Mosiman, Topeka Vice president emeritus, Washburn University Robert L. Mullen, Manhattan Administrator, Hospital District 1 of Rice County (retired) Thomas C. Simpson, M.D., Sterling Physician (family practice, retired) Susan M. Smith, Wichita Senior vice president and chief human relations officer, GLMV Architecture, Inc. Cathy Mih Taylor, M.D., Chanute Neosho County Memorial Hospital (physician, OB/GYN) Kenneth W. Winter, Dodge City General manager, Winter Feed Yard

8 5-111A 06/13 An Independent Licensee of the Blue Cross and Blue Shield Association.