FLORIDA

Key findings in the new report:

• After a one-time increase in 2009, enrollment in Florida HMOs decreased slightly in 2010. Growth in Medicare, Medicaid and Healthy Kids plans was not enough to offset the continued decline of HMO enrollment by employer groups.
  

• The HMO market has become more consolidated as the result of a string of recent acquisitions. For example, Humana is the largest HMO in the state and has acquired Care Plus and the former MetCare HMO. Measured by enrollment, Humana has about 19% of the HMO market here. WellCare is the second largest, and operates as StayWell and HealthEase Florida. (Exhibit 2).
  

•  Florida HMOs improved their net income in 2010, posting net income after taxes of $669.9 million, or 3.5% of underwriting revenues. That is up from 2009 results of $576.7 million, or 3.1% of premium revenues. 
  

As in past years, Humana's Medicare plans account for more than half of the industry's profits. (Exhibit 9) The Humana HMOs had net underwriting income of $436.6 million on their Medicare plans; underwriting net income (before taxes or investments) was $780 million for all HMOs.

• Exhibit 11 is new this year and uses new reporting (required by the Affordable Care Act) to calculate medical loss ratios for the HMOs'  lines of business. The new law requires HMOs and other insurers to maintain loss ratios of at least 80% for individual and small group plans and 85% for large group plans.

November 4, 2010           

Florida Health Market Review 2010 finds:  

As national health reform begins, Medicare drives strong profits for Florida health plans;

Medicaid HMO enrollment tops 1 million;

hospital systems see reduced profits in 2008

Health reform will create significant opportunities and challenges for health insurers and hospital systems in Florida. In 2009, Florida HMOs earned strong profits on their Medicare plans and increased their Medicaid enrollment by 20%. And the major hospital systems in the state continue to grow, although the economic downturn hurt their 2008 profits and has cut into utilization in some parts of the state.

These and other findings are presented in Florida Health Market Review 2010, Allan Baumgarten's eleventh annual report analyzing organizations and trends in the Florida health care market. Baumgarten is an independent analyst based in Minnesota who has published annual reports analyzing health market trends and competition in ten other states: Arizona, California, Colorado, Illinois, Kentucky, Michigan, Minnesota, Ohio, Texas and Wisconsin. He is also the co-author of two reports analyzing health insurance markets in New York, published by the United Hospital Fund. Copies of his reports for Arizona, California, Kentucky and New York are available for PDF download by following links at www.AllanBaumgarten.com

Among the report's findings:

Boosted by profitable Medicare plans, Florida HMOs enjoyed strong profitability in 2009. As a group they had net income of $574.1 million, or 3.1% of premium revenues. They had net income of $718.9 million on their Medicare plans, before taxes and investment income. Humana's Medicare HMOs in the state accounted for $530.6 million of that amount. And margins for the first half of 2010 averaged 3.6%.

While Medicare payment rates and profitability will be contained as a result of the Affordable Care Act, Humana and the other large HMOs in the Florida Medicare market are likely to continue to enjoy strong profits. Other small plans will find it harder to compete but may be attractive targets for acquisition.

Employer group plans were less profitable than in previous years, as medical expenses increased much faster than premiums in 2009.  On average, premium revenues per group (commercial) member per month increased by 1.8%, from $324 in 2008 to $329 in 2009. But medical expenses increased by 8%. Beginning in 2014, HMOs and other insurers will be able to add a large number of new enrollees who have federal subsidies to buy coverage through new insurance exchanges.

Medicaid enrollment increased by 20% in 2009, and was nearly 1.1 million in June 2010. By some estimates, the expansion of Medicaid eligibility that will begin in 2014 will add 1.5 million new Medicaid recipients in the state, many of them in HMOs. But while Medicaid HMOs here were profitable in 2008 and 2007, they were generally not profitable in 2009.

The HMO market has become more consolidated as the result of recent acquisitions. For example, Humana is the largest HMO in the state and has acquired Care Plus and the former MetCare HMO. Humana has about 17% of the HMO market here. WellCare is the second largest, and operates as StayWell and HealthEase Florida. Coventry has acquired three Florida HMOs and now has 9% of the market. Centene, a national Medicaid company based in St. Louis, acquired Citrus Health Plan and will combine it with Sunshine State Health Plan, making it the third largest Medicaid HMO in the state.

Hospital systems in the state enjoyed generally strong profits in 2008. Using financial and utilization data from an annual state survey of hospitals, Baumgarten found that hospitals in South Florida reported net income of $160.5 million or 1.7% of patient revenues. That was much lower than results for 2007, when hospitals in the area had net income of $425 million. However, the result was skewed by large losses at a few hospitals such as Miami Childrens, Boca Raton Community and Mercy Hospital, recently acquired by HCA. The North Broward hospital system and the Baptist hospitals in the area enjoyed strong margins in 2008.

Six years of strong hospital margins has made possible ambitious construction programs in much of the state, But while inpatient capacity has increased, the number of inpatient days in South Florida dropped by about 2% in 2008. As unemployment has grown in the state to more than 12%, fewer people have comprehensive benefits. As a result, some are deferring care or elective surgeries.

In the Tampa-St. Petersburg area, hospital net income dropped from $346.2 million in 2007 to $92.7 million in 2008, or 1.8% of net patient revenues. The HCA hospitals were the most profitable here. HCA hospitals were also strongly profitable in the Jacksonville-Gainesville area, where the average margin for all hospitals was 4.4%. In the Orlando area, Florida Hospital (Adventist) saw its margin decline from 8.3% to 6.4%. Orlando Health, Inc., the second largest system in the area, suffered a large drop in margin. Both saw their other revenues, especially investments, decline sharply.

Excerpts from the report, including the popular "Florida HMOs at a Glance" exhibit can be viewed in the State Reports section of http://www.allanbaumgarten.com. Copies of Florida Health Market Review 2010 can be ordered for $160.00 by calling Baumgarten at 952-925-9121. Fax: 952-925-9341, E-mail: Baumg010@tc.umn.edu

© 2013 Allan Baumgarten. All rights reserved.