Star Tribune Editorial

As the state grapples with the soaring costs of public health programs, a $30 million donation this week by UCare raises fresh questions about whether Minnesota's increasingly wealthy nonprofit insurers are part of the solution or part of the problem.

UCare's giveback to the state was trumpeted Wednesday in a news release from Gov. Mark Dayton's office.

The move by UCare, whose officials wanted to "do the right thing," is a praiseworthy step, though some question whether the insurer might recoup the amount in next year's contract because of Minnesota's uncompetitive contracting system.

In 2010, Minnesota plans such as UCare, Medica, Blue Cross Blue Shield and HealthPartners were paid $3.1 billion in state and federal funds to manage public health care programs for the poor, the disabled and the elderly.

UCare's giveback puts a thought-provoking spotlight on the profitability of the nonprofit plans' public portfolios. A Star Tribune analysis earlier this year found that plans with state public health program enrollees in 2009 earned returns of 4.1 percent, compared with 1.6 percent for their commercial business.

For one public program, the margin was 7.9 percent. Medica, HealthPartners and Blue Cross provide private insurance. UCare does not. A 2010 Wall Street Journal story reported that insurers consider Medicaid, the state-federal program for the poor, a major growth area.

That UCare had an extra $30 million lying around is disturbing. It signals that the state needs to examine its process for awarding managed-care contracts. Right now it's too reliant on how much plans say they'll need.

UCare voluntarily gave up some of the excess profit, but it's unclear if it should have done so in previous years, or if $30 million was the right amount to "contribute" this year. Should it have been more?

State Human Services Commissioner Lucinda Jesson provided too few details on that during an interview this week.

UCare's giveback suggests that other plans profiting from state programs have contributions to make. Dayton has called on the state's other nonprofit plans to follow UCare's lead.

At the end of last week, none of them had committed to doing so despite each of them sitting on reserves of several hundred million dollars.

Those reserves, which ensure the plans' financial soundness, are typically far in excess of industry minimums and have grown dramatically since 2004, when Minnesota lawmakers did away with state reserve caps and went to an industry-promoted risk assessment with no upper limits.

HealthPartners' reserve was $387 million in 2009, up 41 percent since 2005. According to state Commerce Department documents, the bare minimum HealthPartners should have is $87 million.

Blue Cross's reserves grew from $162 million in 2005 to $251 million in 2009; its minimum is $71 million. Medica's grew over the same time period from $321 million to $361 million; its minimum is $109 million. UCare's rose from $138 million to $246 million; its minimum is $106 million.

To be fair, these plans have also grown during this time, so reserves should have increased. The plans also insist that their reserves are not out of the norm by industry standards.

This week, state Health and Human Services funding will be center stage at legislative hearings.

Lawmakers need to drill down into nonprofit financials and ask hard questions. Insurers should be asked to sacrifice first before Minnesota's most vulnerable citizens suffer benefit cuts.

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