Health plans to limit profits

Minnesota's four largest health insurance companies have agreed to put a one-year cap on profits under a deal that aims to help the state budget by cutting back insurers' take from public health programs.

The deal announced Tuesday calls for the plans -- Blue Cross and Blue Shield of Minnesota, HealthPartners, Medica and UCare-- to limit profit margins on taxpayer-funded health programs to 1 percent of revenue in 2011. Any profit above that would be paid back to the state in April 2012.

State Human Services Commissioner Lucinda Jesson said she didn't have exact figures for how much the agreement would mean to the state's bottom line. Had the agreement been in place last year it would have meant a giveback of about $85 million, she said.

That's no windfall relative to the state's $5 billion deficit, but it fits in with Gov. Mark Dayton's effort to find ways to trim soaring health care costs.

Dayton, who had been urging the plans to voluntarily give back to the state, applauded the nonprofit plans "for their civic responsibility in recognizing the state's dire financial condition and helping to reduce our rising health care costs."

Collectively, the state's plans posted profits on public health programs of 3.8 percent in 2010 and 2.6 percent in 2009. That includes the four major plans, plus three smaller ones that aren't part of the agreement.

The four plans said they see the contribution as an appropriate step, given the state's deficit. But several cautioned that the state already has cut health plan rates for the current year, so margins might shrink anyway.

While Geraghty said he'd prefer the money go toward health care and not general fund use, he said he hopes attention now can shift away from profits toward ways to reduce costs and improve care for patients.

"It allows us now to move on the discussion of how do we put into play the long term infrastructure things, which is the conversation we really want to get to," he said.

House Health and Human Services Finance Committee Chairman Jim Abeler commended Dayton for "pushing" the plans and said the state needs to rework the way it deals with the insurers.

But, he added, plans could calculate the 1 percent a variety of ways and no matter how they calculate it the state's take will not be huge. "It's not a golden goose," said Abeler, R-Anoka.

Reason to cooperate

With the state facing a deficit -- and possible deficits in the years to come -- lawmakers and the governor have looked at trimming back health care spending to close the budget gap.

UCare announced in March that it would give $30 million to the treasury. Earlier this month, Dayton revamped the state's health care strategy by ordering new competition for businesses that want to cover Minnesotans.

"I think that the health plans recognize the seriousness of the state's budget problems this year," Jesson said. "Especially when they read some of these proposals that would take 100,000 people off of health care. I think that drives home the seriousness to the people in the health care community."

Sen. Sean Nienow, a Republican from Cambridge who has worked on health care payment issues, said he would push to put parameters around how the margins are accounted for.

Another contentious issue centers on reserves, the large pots of money health care companies set aside to cover catastrophic events.

"You've got billions in reserves and a portion shouldn't be there, but where should they go?" Nienow said. "I don't have answers to those questions, but they're questions that need to be asked."

Nonprofit requirement

A Blue Cross spokeswoman said Geraghty's letter, obtained by the Star Tribune, was simply a summary of a conversation, not an outline of the deal itself.

Jesson agreed. "That was not the agreement. Certainly the governor did say I'm not going to turn around in two weeks and go after your reserves. But he said he can't dictate what the Legislature's going to do."

While the focus on profits isn't new, a spokeswoman for the Center on Budget and Policy Priorities in Washington, D.C., said it didn't know of another state that has put a cap on insurers' profits to deal with budget shortfalls.

The plans say they have years where they lose money on state programs and years where they post profits. Blue Cross said its five-year average profit margin on state programs is negative 0.9 percent. Medica's five-year return is 1.2 percent. HealthPartners said it was "well below 1 percent." UCare saw a 4.4 percent margin in that timeframe.

"One piece that's missing, there's a lot of work going on with plans working with providers to improve the quality of care and reduce costs," said Ghita Worcester, UCare's senior vice president of public affairs. "We want to make sure they're going hand in glove when we talk about all of this."