MN Health Plan Profits Drop in 2012

An uptick in spending on medical claims among the state’s seven largest health insurers contributed to their smallest combined operating margin since 2008.

Minnesota’s seven largest health insurance companies posted a combined operating profit of 0.57 percent, or $120.1 million, in 2012 across public and private health plan options, according to a report released Monday by the Minnesota Council of Health Plans.
The margin is the smallest since 2008, when the insurers’ combined operating margin was 0.39 percent. (Operating margin was 1.8 percent in 2011, 1.52 percent in 2010, and 0.83 percent in 2009.) The health insurance companies’ combined revenue from premiums totaled $20.9 billion last year—up from $19.8 billion in 2011.
According to the report, an uptick in spending on medical claims contributed to the slim profit margins. The state’s seven largest health insurers collectively paid $18.98 billion in medical claims in 2012—which translates to $52 million every day for doctor visits, prescription drugs, hospital stays, and other medical services.
Spending for care was up $1.3 billion, or 7 percent, as compared to 2011—and per-person spending on care increased 5.1 percent.
The report combines the financial performance of seven locally based nonprofit insurance companies—Blue Cross and Blue Shield of Minnesota, HealthPartners, UCare, Medica, Preferred One, Metropolitan Health Plan, and Sanford Health Plan of Minnesota.
It found that spending for outpatient hospital care and emergency care rose 10 percent in 2012, and spending on care for hospitalizations rose 9 percent. Meanwhile, prescription drug and non-reusable medical supplies spending rose 14 percent. Spending for care provided by chiropractors, therapists, social workers, and nurse practitioners as well as spending on chemical dependency care and mental health services rose 15 percent.
Meanwhile, spending on durable medical goods like wheelchairs, eyewear, hearing aids, and oxygen decreased 5 percent, and spending on nursing care was down 5 percent.
Operating profits on public programs were 1.39 percent, or $56.7 million, the report found. (That’s down from 1.5 percent in 2011, when the seven health insurers agreed to return profits above 1 percent to the state to help fund two Minnesota public health programs.) The average operating margin on public programs over the past 10 years is 1.8 percent.
Meanwhile, the report indicated that combined enrollment in the seven member health plans topped 4.4 million last year, up 2 percent from 2011.
Separate from the Minnesota Council of Health Plans report, Blue Cross and Blue Shield of Minnesota and HealthPartners released their own financial data on Monday.
Blue Cross, the state’s largest nonprofit health insurer, reported an operating loss of 0.6 percent, or $54.8 million, in 2012. The organization said that strong performance within its investment portfolio and additional sources of income helped offset operational losses and enabled it to close out the year with net income totaling $68.4 million. Full-year revenues, meanwhile, totaled $9.5 billion.
“In 2012, we saw the trend of historically low claims expense come to a close, which contributed to the operating loss that we experienced during the year,” Chief Financial Officer Jamison Rice said in a statement. “During the recent recession, our members did not seek levels of care consistent with historical patterns, and utilization was lower than expected. As the overall economy strengthened, the volume and cost of our medical claims rose, contributing to the operating loss experienced last year.”
HealthPartners, meanwhile, said that its operating margins were 4.4 percent, or $140 million. Full-year revenue totaled $3.2 billion.
According to the Star Tribune, UCare’s operating income was 2.8 percent, or $62.5 million, and Medica’s operating income was 1.2 percent, or $36 million.