MINNESOTA

June 4, 2010

Minnesota Health Market Review 2010 finds:

Minnesota HMO Profits Get Big Boost From Medicaid Plans and Investments

 (Minneapolis-St. Paul) Minnesota HMOs enjoyed their strongest profit margins since 2004, boosted by strong profits on Medicaid plans and a turnaround in their investment income. In addition, their enrollment increased for the first time in 10 years.

   These and other important market developments are analyzed in Part One of Minnesota Health Market Review 2010. The report, released here today, is Allan Baumgarten's 21st annual report analyzing the Minnesota health care market. He is an independent analyst and consultant based in Minnesota who has also prepared annual reports analyzing health care markets in 11 other states: Arizona, California, Colorado, Florida, Illinois, Kentucky, Michigan, New York, Ohio, Texas and Wisconsin. Part Two of the Minnesota report will be released later this year and will include an analysis of profitability and care utilization for hospitals in the state and updated information on HMOs.

 Among the findings in the new report:

 After a sharp drop in net income in 2008, Minnesota HMOs were strongly profitable in 2009. HMOs and county Medicaid plans had net income of $170 million, or 2.6% of operating revenues of $6.6 billion. They had net income from operations of $117.2 million plus investment income of $52.7 million

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Health plans increased their profits on state government plans, especially Medicaid. Minnesota health plans improved their Medicaid profits (not including investment income) from $80.8 million in 2008 to $119.5 million in 2009. On average they collected $70 more in premiums from the state per member per month than they paid out in medical expenses. Losses on General Assistance and MinnesotaCare offset part of that profit. Note that health plans will not be at risk for General Assistance in 2010. Blue Cross Blue Shield of Minnesota and the separate insurance companies owned by HealthPartners and Medica had $57.3 million in operating net income from Medicare plans.

 Enrollment in HMOs and county plans increased by 3.4% in 2009. For the first time since 1999, growth in Medicare and state plans more than offset the continued outflow of employer groups. State plans like Medicaid now account for more than half of all HMO enrollment, and employer group membership has dropped from a peak of 1 million in the 1990s to below 350,000.

 Health premiums continue to grow faster than general inflation and the overall economy. On a per member per month basis, the premium revenues that HMOs collected from their employer customers increased by 9.5% in 2009, from $345 to $377 per member per month. That compares to increases of 8.6% in 2008, 9.0% in 2007 and 8.5% in 2006. Employers now pay, on average, $108 more per member per month than they did five years ago. In 2009, average monthly medical expenses increased by 6.8%.

On average, HMOs maintain surpluses that are 2.5 times the required minimum. At the end of 2009, Minnesota HMOs had combined capital of $1.3 billion, much higher than the amount required under state law. Current state law sets no ceiling on HMO surpluses.

Excerpts from the report, including the popular "Minnesota Health Plans at a Glance" page can be viewed at http://www.AllanBaumgarten.com. Copies of Minnesota Health Market Review 2010 in interactive PDF format, including both Parts One and Two, can be ordered for $160.00 plus $5.00 shipping. Call 952/925-9121 or fax 952/925-9341. E-mail address: Baumg010@tc.umn.edu

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 May 5, 2010

 Part Two of Minnesota Health Market Review 2009 was released this week and shows how the economic downturn is hurting hospital utilization and profitability. The report finds:

• While the three large systems in the metro area improved their results in 2008, large non-operating losses by two suburban hospitals brought down overall results for the group.

Allina, Fairview and HealthEast all improved their net income in 2008, from a combined 2007 total of $136 million to $173 million. However, large non-operating losses at Methodist and North Memorial in 2008 meant that the overall results for Twin Cities hospitals was a loss of $3.9 million, compared to 2007 net income of $275 million.

• The major hospitals in outstate Minnesota reported lower net income in 2008.

• Enrollment in insured health plans increased slightly.
  

Enrollment of employer groups in Minnesota HMOs continues to decline but it was offset in the first half of 2009 by growth in Medicaid and Medicare HMO membership.

© 2010 Allan Baumgarten. All rights reserved.