Independent Health Association had a good year in 2012 for continued national accolades, partnerships and progress in pushing a healthier community, but it didn’t translate to the bottom line.

The Williamsville-based health insurer Monday reported a net loss of $50.1 million for 2012, compared with a $28.2 million profit in 2011, as both its medical and prescription-drug costs for Medicaid members rose and it set aside 17 times more money in reserve to cover unpaid premiums.

Meanwhile, the insurer’s CEO, Dr. Michael Cropp, received total compensation of $1.5 million, including an $870,880 salary and a $631,742 bonus and other compensation, according to a state regulatory filing known as Schedule G. The filing does not require the other compensation to be broken out into details such as perks.

“The health care industry is extremely complex, highly competitive and rapidly changing, especially during this period of national reform, requiring experienced and effective executive leadership,” said spokesman Frank J. Sava.

Mark Johnson, executive vice president and chief financial officer, earned even more, at $1.62 million, with a $608,462 salary and a $1 million bonus that included a one-time long-term retention payment. The top 10 highly paid executives made $6.85 million in all.

“This payment recognizes Dr. Cropp’s and the board of directors’ confidence in Mr. Johnson and the important role he plays within the organization,” Sava said. “His experience and financial acumen has helped establish Independent Health as one of the region’s most successful and financially strong organizations.”

Independent Health, like HealthNow New York and Univera Healthcare, is a nonprofit health insurer, meaning the company is neither privately owned nor a publicly traded firm with shareholders. Rather, it operates for the public benefit.

Even so, Independent Health’s financial performance results in a profit or loss, which they call a surplus or deficit. That profit gets plowed back into the company into reserves for future claims or operating losses or for reinvestment into operations. Indeed, the company said its reserve balance of $511 million remained high enough for it to “absorb the loss without making significant rate adjustments.”

Independent Health reports as two units: IHA and Independent Health Benefits Corp. The total loss included $49.4 million at IHA and $666,464 at IHBC.

Last year, the overall company took in $1.86 billion in premium revenues, up 10.7 percent from the prior year. Premiums are its sole source of income.

But the company recorded a net underwriting loss – essentially, its operating results before investments and other items – of $65.25 million, compared with a net underwriting gain in 2011 of $11.84 million, after the medical and administrative costs were deducted.

The region’s second-largest carrier said it blamed the loss specifically on Medicaid “reimbursement challenges and investments in information technology and other infrastructure” to prepare for health care reform and the launch of New York’s health insurance exchange. The company anticipated those expenses a year ago.

In particular, the company cited a $38.9 million reserve for projected premium shortfalls for its Medicaid business and other state-mandated products. That reserve was set up for 2013 in anticipation of claims being higher than premiums, but it was charged against 2012 earnings. The company also said it invested more than $30 million in technology and infrastructure to be able to meet customer needs in the exchange. That’s a total of nearly $69 million.

However, the bigger factors appear to be a surge in member claims, also driven by Medicaid. At its primary business, hospital and doctor benefits jumped 12.1 percent to $947.9 million, while prescription drug expenses leaped 30.3 percent to $243.2 million. Specifically, total Medicaid claims expenses rose 61 percent to $212 million, while Medicare claim expenses rose 16 percent to $712 million.

Other professional or ancillary medical services and state surcharges both more than doubled to $8.25 million and $13.64 million, respectively, from $3.18 million and $5.72 million. General administrative expenses – overhead – rose 7 percent to $114.53 million.

Medicaid costs have soared for insurers in New York since October 2011, when the state started shifting “carve-in” services such as the Medicaid drug benefit to managed-care plans as part of a broader effort to shift beneficiaries from a fee-for-service model to managed care. Since the change happened so late in the year, it didn’t impact 2011 much.

But the expenses of paying for high-cost drugs and providing coverage to higher-risk members slammed Independent Health for all of 2012, as the company appears to have more users of prescription drugs, Johnson said. For last year, 96.5 cents of every premium dollar was spent on medical costs, far exceeding standards. Sava said the company is working with state officials to find a solution for “managing this challenging population.”

Meanwhile, the commercial business for employer groups and individuals “continued to perform well,” as the company retained 97 percent of accounts and kept expenses within expectations. About 85 cents of every premium dollar was spent on claims. The company’s Medicare business also saw some higher medical costs, with 92.5 cents of every dollar spent on claims.

Sava said the company’s “affiliate” companies also performed well, with $56 million in overall net revenues for Pharmacy Benefit Dimensions, Reliance Rx and Nova. Pharmacy Benefit added 50,000 new members, Reliance filled 37,000 prescriptions, and Nova served 100,000 members across business lines.