HealthPartners is eliminating about 75 jobs as the Bloomington-based health insurer and hospital operator adjusts to diminished revenue with the elimination this year of Medicare Cost health plans across much of Minnesota.
Federal law called for Medicare Cost plans to be phased out starting in 2019 in counties where there is significant competition from insurers that sell Medicare Advantage health insurance plans. HealthPartners was one of three carriers in the state that sold Medicare Cost plans statewide, but it now offers the coverage in just a minority of counties.
While diminished Medicare revenue isn’t surprising on the insurance side, HealthPartners and Minneapolis-based Allina Health System said the shift has hurt financial performance for health care providers, as well.
“The market dynamics of the Medicare Cost transition are important here, affecting [insurance] plan and care system revenue,” Vince Rivard, a HealthPartners spokesman, said in a statement to the Star Tribune. “It’s not just us, it’s the entire market.”
The Medicare change prompted more than 300,000 seniors in the state to pick new health plans. Some wound up in Medicare Advantage plans, which are run by private health insurers. Others opted for the original Medicare program, where many purchased Medicare Supplement coverage to handle out-of-pocket costs.
In a financial statement released this week, Allina Health System said it posted an $11.5 million loss on $3.2 billion of revenue during the first nine months of the year. Diminished Medicare revenue stemming from the Cost plan transition was one of four factors behind the decline, said Ric Magnuson, the chief financial officer at Allina.
“You knew how you were going to get paid [with Medicare Cost plans] and then, depending on which plan they chose, you get reimbursed differently,” Magnuson said. “It impacted our bottom line.”
The roughly 75 jobs being eliminated at HealthPartners are coming in a number of areas including information services and technology. Last week, HealthPartners announced the elimination of about 300 jobs with the closure of its retail pharmacies, citing trends in the pharmacy business.
HealthPartners is a nonprofit group that operates Regions Hospital in St. Paul and Methodist Hospital in St. Louis Park. Last year, it hit the $7 billion mark in annual revenue and added its seventh hospital. HealthPartners runs 55 primary-care clinics, 22 urgent-care centers and 24 dental clinics.
HealthPartners, Blue Cross and Blue Shield of Minnesota and Medica all sold Medicare Cost plans statewide in 2018. The carriers tried to maintain market share this year by selling Medicare Advantage (MA) plans as well as Medicare Supplement policies, but none of the carriers could completely offset the lost Cost plan enrollment.
Regulatory filings from HealthPartners released this week show that overall health insurance revenue and operating income is down across the first nine months compared with 2018.
“While we grew in [Medicare Supplement] and MA, it wasn’t as much as we expected,” Rivard said.
“Our patients and members need more affordable care and coverage, and they’re looking to us to find new and more efficient ways to serve them,” he said. “The changes, which are difficult for our team, are part of our plan to do that, and to position us well for the future.”