MICHIGAN




June 22, 2010

 

Michigan Health Market Review 2010 finds:

HMOs add members and maintain strong profits

 

 (Detroit/Ann Arbor) HMOs in Michigan increased their enrollment for the first time in 10 years in 2009 and enjoyed strong profits as well. However, fewer people had insurance through employer group plans and Medicaid and other public programs covered more.

 

 These and other findings, based on an analysis of the finances and enrollment trends of Michigan's health insurance companies, are reported in Part One of Michigan Health Market Review 2010, released here today. This is the 14th annual Michigan market study, first published in 1997 by Allan Baumgarten, an independent analyst and consultant based in Minnesota. Later this year, the Part Two report will analyze hospital profitability and utilization and compare HMOs on utilization and quality of care measures. He has also published annual market reports in Arizona, California, Colorado, Florida, Illinois, Kentucky, Minnesota, New York, Ohio, Texas and Wisconsin.

 

 Among the findings in the 2010 report:

  • Enrollment in Michigan HMOs increased by 4.5% in 2009, as Medicaid HMOs added 150,000 new members. About 45% of the state's 2.6 million HMO enrollees are in Medicaid plans, while enrollment in HMO employer plans has dropped to 1.3 million, its lowest level since the early 1990s. Employers have departed for plans that are less comprehensive and less expensive or have dropped coverage altogether.



 

  • On average, Michigan HMOs had margins of 2% in 2009. They had net income of $195.7 million, less than in 2008 when they earned net income of $226 million, or 2.6% of premiums.



 

  • Medicaid plans were especially profitable, with HMOs posting net income of $97.4 million. On average, Medicaid HMOs spent 83.2% of each premium dollar for medical expenses in 2009.And Medicaid plans will gain numerous new customers when health reform is implemented.
  • Commercial premium revenues increased by an average of 2.7% in 2009, from $300 to $308 per member per month. That was the lowest increase in the past 10 years. Still Michigan employers paid $62 more per member per month in 2009 than in 2004. Medical expenses for employer groups increased by 4.9%, resulting in lower profits on that line of business.
  • Enrollment in Medicare Advantage HMOs increased again, though it is still less than 10% of seniors. About 85,000 seniors were still enrolled in private fee-for-service plans in January 2010. Those plans are shutting down because of new federal requirements. Some of those seniors are apparently choosing HMO plans while others, who want broader choice of physicians, are probably returning to Medicare Supplement plans.

Excerpts from the report, including the helpful "Michigan HMOs at a Glance" page can be viewed at www.AllanBaumgarten.com. Free PDF downloads of previous reports for Arizona, California, Kentucky, New York and Texas are also available there. A subscription to Michigan Health Market Review 2010, including both Parts One and Two, can be ordered from Allan Baumgarten for $160.00. Call 952/925-9121 or fax 952/925-9341. E-mail address: Baumg010@tc.umn.edu

-End-



March 29, 2010

 Part Two of Michigan Health Market 2009 is released this week.


Below you will find a brief summary of the report, which analyzes hospital profitability and utilization using 2008 data and updates enrollment information and financial results for Michigan health plans through June 2009. Part One of Michigan Health Market Review 2010 will be released in July. The 2010 report will be the 14th annual edition of the Michigan market analysis, which was first published in 1997.


 The economic downturn, which has hit Michigan especially hard, is taking a toll on health insurers and hospitals. The report finds:

  • After six straight years of improving profitability, Detroit-area hospital saw their profits plunge in 2008 and 2009.  Based on data from Medicare cost reports for 2008 fiscal years, hospitals in the area lost $77.6 million, or 0.8% of net patient revenues of $9.5 billion. By comparison, they had net income in 2007 of $213.4 million, or 2.3% of net patient revenues. That compares to net income of $191.5 million in 2006 (2.2% of net patient revenues) and $163.2 million in 2005 (2.0%). (See Exhibits 4 and 5) One major difference is the decline of other revenues (investment income, philanthropy and government grants) from $689 million in 2007 to $357 million in 2008. And in what might be a sign of 2009 results, the St. John hospitals lost $49 million in their fiscal year ending June 30, 2009.


 

Net income also fell at 33 large hospitals in other parts of the state. Those hospitals had average margins of less than 1%, down from 10.2% in 2007 and 8.4% in 2006. (See Exhibit 6)

 

  • Inpatient hospital days at Detroit area hospitals declined by almost 2% in 2008. Rising unemployment, declining population and the growth of high deductible plans are exerting downward pressure on utilization. (See Exhibit 7) People without coverage or who must satisfy high deductibles are likely deferring elective procedures. The 2009 opening of new hospitals in Novi and West Bloomfield created new capacity. And the announced acquisition of the Detroit Medical Center hospitals by Vanguard, an investor-owned company, means more competition for a shrinking pie of hospital volume.

  • After consecutive years of decline, enrollment in Michigan HMOs increased slightly in the first half of 2009. Commercial HMO membership continued to decline, particularly from Blue Care Network and Health Alliance Plan. But enrollment in Medicaid HMO plans (and Medicaid generally) grew. Medicaid HMOs added about 112,000 enrollees in the 18 months through June 2009 and now account for 43% of all HMO enrollees in the state.

  • HMOs reported lower net income for the first half of 2009. Michigan HMOs had net income of $70 million through June 2009, or 1.5% of underwriting revenues. In 2008, the average margin was 2.6%.



 





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