FLORIDA

Given the recent enactment of far-reaching federal health reform legislation with its expansion of Medicaid and creation of subsidized health insurance exchanges, we wanted to report the most current health insurer results to you as soon as they became available from the state. We have released a set of exhibits reporting HMO and Blue Cross enrollment and profitability data for 2009, which will be part of my forthcoming report, Florida Health Market Review 2010. The full report, which is my 11^th annual market study for the state, is scheduled for release in about six weeks.  To be notified when the new report is available, send e-mail to Baumg010@tc.umn.edu  Links to local coverage of the new report are on our front page.

Some key points:

• After 10 straight years of decline, enrollment in Florida HMOs increased by 4% in 2009. And while enrollment by employer groups continues to decrease, enrollment in Medicaid and Medicare HMOs has increased. (Exhibits 4 and 5; detail on Medicare in Exhibit 8 and Medicaid in Exhibit 9)

• 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. Humana has about 16% of the HMO market here. WellCare is the second largest, and operates as StayWell and HealthEase Florida. (Exhibit 2)

• In 2009, Florida HMOs had net income of $576.7 million, or 3.1% of premium revenues of $18.7 billion. That is slightly improved over their results in 2008. (Exhibits 11 and 12)

• Humana accounted for more than 3/5 of that profitability in 2009. In Florida, Humana has consistently reported very strong net income on its Medicare plans - $302 million in 2009. (Exhibit 13)

HMOs and hospitals alike in Florida reported strong profitability in 2007, even as HMO enrollment continued to decline. Medicare plans were especially lucrative and enrollment in senior plans continues to grow. However, both hospitals and health plans face significant risks in 2009.

These and other findings are presented in Florida Health Market Review 2008, Allan Baumgarten's tenth annual report analyzing the Florida health care market. The report presents a competitive analysis of health plans and hospital systems in the state. Baumgarten, an independent analyst based in Minnesota, also publishes annual reports analyzing health market trends and competition in ten other states: Arizona, California, Colorado, Illinois, Kentucky, Michigan, Minnesota, Ohio, Texas and Wisconsin. The new report compares Florida HMOs to their counterparts in other states on HMO premium trend, enrollment, profitability and use of capitation.

Among the report's findings:

• Florida HMOs had strong profits in 2007, earning $640.4 million.

In 2007, Florida HMOs posted net income of $640.4 million, or 3.9% of premium revenues. About $218 million was from investment income and that is likely to be significantly reduced in 2008 and 2009.

• Medicare HMOs have been especially profitable and have gained enrollment.

Florida HMOs had net operating income of $344.6 million (before taxes or investment income) from their Medicare operations in 2007. Humana (including CarePlus) is the largest Medicare HMO in the state. It had net operating income of $258.4 million in 2007. There are several new Medicare HMOs in the state and enrollment in seniors planned increased by 58,000 in the last 18 months. However, the Obama administration has said that it would seek to reduce HMO payments and use those savings to help finance reform measures.

• Hospitals reported very strong results in 2007.

Using financial and utilization data from an annual state survey of hospitals, Baumgarten found that hospitals in South Florida reported $425 million, or 4.3% of net patient revenues. In the Tampa-St. Petersburg area, hospitals had net income of $346.2 million, or 7.7% of patient revenues. In the Orlando region, hospital reported net income of $306 million, or 8.3% of net patient revenues. Five years of strong profits have enabled hospitals to launch ambitious construction programs, including several new hospitals.

However, hospitals face significant risks going forward. As unemployment grows and employers struggle fewer people have insurance or comprehensive benefits. Faced with a high deductible people are putting off procedures and hospitals are seeing new collection problems. Investment income is down and the cost of borrowing, if available, is much higher.

• Enrollment in Florida HMOs decreased to 3.4 million in June 2008.

Since peaking at nearly 5 million members in 2000, HMO enrollment has declined steadily. Most of the decrease was in employer-sponsored plans, as companies sought other, less comprehensive health benefit options after consecutive years of high premium increases. The major health plan companies have encouraged that movement, preferring to administer benefits to employer groups through their affiliated insurance companies. Health Options, the HMO of Blue Cross Blue Shield of Florida, saw its enrollment in employer groups go from 536,000 in December 2004 to 150,000 in June 2008.

• HMOs increased their average premium revenues by 5.7% in 2007

From 1999 to 2004 premium revenues increased at double-digit rates. HMOs collected an average of $301.20 in premium revenue per commercial member per month in 2007. Employers paid, on average, $104 more per member month for employee coverages when comparing 2002 to 2007.

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 2008 can be ordered for $135.00 by calling Baumgarten at 952-925-9121. Fax: 952-925-9341, E-mail: Baumg010@tc.umn.edu

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© 2010 Allan Baumgarten. All rights reserved.