Minnesota Managed Care Review

NEWS RELEASE
June 19, 1998
Contact: Allan Baumgarten, 612/925-9121

Minnesota Managed Care Review 1998 finds: HMO premiums turn upward in 1997, but HMOs still lose money.

The trend in HMO premium revenues began a sharp upward turn in 1997, but that was not enough to restore HMO profitability. Enrollment in insured HMO plans was flat overall, but the number of employers using HMOs to administer self-funded benefit plans continues to increase.

These and other findings are presented in the spring edition of Minnesota Managed Care Review 1998, Allan Baumgarten's ninth annual report analyzing key trends and issues in the Minnesota health care market. The report, released today, presents detailed comparisons of health plans in the state and describes the impact of market initiatives by purchasers and providers.

The new report finds:

HMO premium revenues have begun to increase again. On average, HMO increased their premium revenues per commercial enrollee per month by 4.0 percent to $123.52. Medica posted the largest increase, adding 8.3 percent and increasing its average monthly revenue to $129.10.
Notwithstanding those increases, Minnesota HMOs lost $47.2 million on their commercial operations in 1997. That is a significant improvement over 1996 when their losses on commercial operations exceeded $62 million. Investment income of $49.3 million, also less than last year, and surpluses on Medicaid plans improved the financial picture. However, the HMOs ended with a net loss of $10.1 million for 1997, or 0.4 percent of revenues of $2.7 billion.
HMOs increased profits on their Medical Assistance (Medicaid) plans, up to $26.5 million. On average, HMOs had surplus of $12.84 per Medicaid enrollee per month. How long that will continue depends, in part, on the result. of efforts by many Minnesota counties to assume additional responsibilities for purchasing services for Medicaid enrollees. Much of the HMOs' gain on Medicaid plans was offset by losses of $23.6 million on two other state programs - MinnesotaCare and General Assistance Medical Care.
Enrollment in insured HMO plans was generally flat in 1997, increasing by only 0.6 percent to 1.4 million. By comparison, enrollment had grown by 150,000 lives in 1996. Medica lost 36,000 commercial lives from its insured HMO plans, but some of those employer groups apparently switched into self-funded plans administered by Medica. According to figures provided by the Minnesota Council of Health Plans, Minnesota HMOs added more than 300,000 lives to the self-funded group benefit plans that they administer.

This report is based on Baumgarten’s analysis of the first round of HMO annual statements filed in April this year. After the HMOs submit additional filings in July, he will release a full report with additional analysis of HMO and hospital performance data and the impact of initiatives by purchasers and providers. Baumgarten, an independent research analyst and consultant on health care policy and finance, will also publish annual reports in 1998 analyzing managed care markets in six other states: Colorado, Michigan, Ohio and Illinois and, new this year, Florida and Texas.

An annual subscription to Minnesota Managed Care Review 1998, including the spring issue and a report to be issued in September, is available from Allan Baumgarten for $110.00. Call 612/925-9121 (FAX 612/925-9341). E-mail address: Baumg010@gold.tc.umn.edu

This file has been provided for MCOL Subscribers only.

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