Profits for Minnesota's largest health plans drop in 2012

  • Article by: JACKIE CROSBY , Star Tribune
  • Updated: April 1, 2013 - 8:54 PM

Margin for Minnesota health insurers is smallest since 2008 as health care costs rise at a faster pace than 2012 premiums.

As spending on medical claims continued to climb, Minnesota’s largest insurance companies posted a combined annual operating profit of 0.57 percent, or $120 million, last year across public and private health plan options.

It was the smallest margin since 2008, according to financial data released Monday by the Minnesota Council of Health Plans.

Rising medical claims combined with stiffer competition among the plans helped keep overall profit margins slim, said Julie Brunner, executive director for the industry group.

“We hear stories about companies moving from one insurer to another for 1 or 2 percent — it’s a very competitive market,” Brunner said. “But we continue to see the cost of health care grow, which is of concern.”

The report consolidates financial performance across seven nonprofit insurance companies — Blue Cross and Blue Shield of Minnesota, HealthPartners, UCare, Medica, Preferred One, Metropolitan Health Plan and Sanford Health Plan of Minnesota.

Costs rose by double digits for outpatient hospital care, emergency room visits, prescription drugs, and addiction and mental health treatment during the year, according to the report.

Insurers collected 5.8 percent more revenue in premiums, or $21 billion, while health care spending was up 7.4 percent, to $19 billion. On a per-person basis, the plans spent 5 percent more on care, compared to a nearly flat 0.4 percent rise during the previous year.

The data combines results across both private and public health plan offerings — including policies that cover individuals and businesses as well as managed care plans that cover Minnesotans enrolled in public programs, such as Medical Assistance and MinnesotaCare.

Operating profits on public programs were 1.39 percent, according to the report. That compares with a 1.5 percent margin the previous year, when the plans agreed to return profit above 1 percent to the state to address a growing budget deficit in which health care costs play an outsized role. The one-time agreement netted $75 million in excess reserves for state coffers.

Individual insurance companies posted vastly different financial results and did not separate profit margin details on public plans.

Blue Cross Blue Shield of Minnesota, the state’s largest nonprofit company, reported an operating loss of 0.6 percent, or $54.8 million. Blue Cross said its investment portfolio and additional sources of income buffered some of the operational losses from the insurance side to lift the company to a net income of $68.4 million.

More seeking care

Blue Cross officials said the operating losses came as the economy began to strengthen and people who might have put off visits to the doctor when budgets were tight began to seek care again.

“During the recent recession, our members did not seek levels of care consistent with historical patterns, and utilization was lower than expected,” Chief Financial Officer Jamison Rice said in a statement.

HealthPartners, meanwhile, posted the biggest gains, with operating margins of 4.4 percent, or $140 million.

UCare’s operating income was 2.8 percent, or $62.5 million, while Medica reported operating income of 1.2 percent, or $36 million.

Enrollment in health plans grew by 2 percent during the year, reflecting greater numbers of Minnesotans taking advantage of expanded Medicaid offerings for low-income citizens and an improving economy in which businesses are starting to hire and provide health benefits.

Building up reserves

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