Major changes with the federal Affordable Care Act expanded coverage through Minnesota’s nonprofit health insurers last year, while also boosting operating income from the state’s public health insurance programs.
The health law expanded access to the public programs, and insurers hired by the state to manage care collectively saw more income and enrollees as a result, according to figures released Wednesday by the Minnesota Council of Health Plans. The increases stoked criticism that the state is overpaying the health plans.
But health plans last year also lost money in the individual market, where tax credits provided by the health law contributed to market growth of about 53 percent, or roughly 101,000 people.
And there was an unusually large 16 percent decline last year in people covered by fully insured plans bought by small businesses.
“In the aggregate … things appear to be relatively stable,” said Jim Schowalter, president and chief executive at the Minnesota Council of Health Plans, in an interview. But he added: “There’s many shifts going on in the market place.”
Collectively, the insurers posted operating income last year of about $229.4 million on $23.7 billion in revenue, for an operating margin of just under 1 percent.
The operating margin was up from 0.67 percent in 2013, when insurers collectively posted operating income of $146.5 million on $21.9 billion in revenue.
It was the most profitable year overall for insurers since 2011, although some health plans reported operating losses.
Health law changes were key drivers behind a nearly 7 percent increase in overall enrollment for the insurers between 2013 and 2014. The tally for people with coverage through the plans grew by 308,895, to more than 4.8 million people.
The numbers released Wednesday summarize financial results for seven nonprofit insurers including Eagan-based Blue Cross and Blue Shield of Minnesota, Bloomington-based HealthPartners and Minnetonka-based Medica.
All three companies plus Minneapolis-based UCare have HMO divisions that are hired by the state to manage care for people enrolled in the Medicaid and MinnesotaCare programs. Over the years, HMOs have been criticized for collecting what some feel is excessive income from the public programs.
Last year, HMOs had an operating margin of 3.6 percent on the public program business, which generated operating income of $185.2 million. Income in 2013 was $115.3 million, or 2.6 percent of revenue. Enrollment grew by about 29 percent, or 149,000 people.
Increased profits reflected both a growing market as well as volatility, Schowalter said.
Medical care spending for public program enrollees declined by 11 percent on a per-person basis in 2014, he said. The previous year, per-person spending increased by 15 percent.
“When you have big changes in the numbers of people being served, or the cost of serving them, the change is likely to be bigger than usual,” he said. “It’s difficult under those circumstances to predict exactly where it’s going to settle out.”
But David Feinwachs, a former lobbyist at the Minnesota Hospital Association who has called for scrutiny at the Capitol over HMO income, said the financial results provide more evidence that health plans are being overpaid.
At the Department of Human Services, which administers the public programs, Commissioner Lucinda Jesson said Wednesday in a statement: “We are concerned about the operating margins for health plans. … That’s one reason we have put our managed care contracts out for bid statewide for 2016.”
Expanded coverage in the individual market did not help the bottom line for insurance companies overall. The health plans collectively posted about $316 million in individual market losses, the trade group reported Wednesday. One factor was a faster-than-expected transition of people with expensive health conditions from the state’s high-risk insurance pool into the individual market, Schowalter said.
For several years, enrollment in fully insured health plans for small employer groups — meaning 50 people or less — has been declining by anywhere from 1 to 4 percentage points. But the 16 percent decline between 2013 and 2014 amounted to a significant acceleration of the trend, Schowalter said.
Interpreting the decline was difficult, he added, because some small employers might simply have shift to “self-insured” plans, where employers take the financial risk for the cost of medical claims. The trade group tracked an increase of 3.6 percent, or about 82,000 people, in self-insured plans last year.