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(St. Paul) … For the first time in five years, premiums collected by Minnesota's nonprofit HMOs and health plans covered payouts for patients' medical expenses, according to annual financial reports filed today with the State of Minnesota. The state's 10 health plans collected $5.1 billion in premiums and paid out $4.6 billion in medical expenses, resulting in a net operating gain of seven-tenths of 1 percent or $37.4 million. The gain allowed health plans to begin rebuilding state mandated reserves that had been steadily declining due to operating losses in prior years.
"While some plans posted losses again this year, I am encouraged that as a group they are in the black for the first time in five years," said Michael Scandrett, executive director of the Minnesota Council of Health Plans.
The improved financial stability means that as a group, the health plans did not rely on investment income and mandated cash reserves to cover operating expenses.
A total of $92.7 million was deposited into reserve, including $55.1 million from investment returns. State law requires a reserve of at least one month's operating expenses. Health plans now average 1.8 months reserve, up from a low of 1.5 in 1998.
Other trends evident in the annual financial filings include:
- Medical care expenses increased by nearly 11 percent, the ninth straight annual increase
- Enrollment declined for the first time in 10 years
- State health care premium taxes increased to nearly $52 million
- Administrative costs decreased slightly to 9.3 percent of premium revenue and have hovered near 9 percent since 1993.
Medical expenses rise, trend expected to continue
As for the increasing costs of health care, Scandrett said that the trend shows no signs of slowing. Medical care costs increased by nearly 11 percent to $4.6 billion in 2000, due to continued growth in patient utilization, an aging population, new technology and treatments, and higher drug costs. The monthly per person costs for prescription drugs alone increased by 16 percent in 2000. Premiums increased by 15.7 percent on average as health plans adjusted premiums to catch up to medical costs.
"I do not see an end in sight. Premiums will continue to rise due to high patient demand and escalating prices of new drugs and medical technology," Scandrett said.
To cope with rising costs, employers are seeking help from the Minnesota Legislature. Several bills are being considered that would grant relief from rigid state regulations and high health care taxes. Pending legislative proposals will reduce state-imposed costs and allow health plans to offer more affordable products in the marketplace.
Enrollment declines
For the first time in 10 years, total enrollment in Minnesota's fully insured and self-insured HMOs decreased. Enrollment in 2000 was 2.4 million, down nearly 5 percent from 1999. This decrease is largely due to HealthPartners' decision to discontinue providing administrative services to the Buyers Health Care Action Group (BHCAG), resulting in a decrease of more than 100,000 enrollees. Some of the health plans are seeing employers switching from their traditional HMO plans to their other managed care products that offer more flexibility and are subject to fewer state regulations, Sandrett said.
Self-insured members represent more than 51 percent of the health plans' employer-based enrollment.
Continued growth in premium taxes impacts market
Minnesotans who work for smaller employers and those who buy individual health coverage paid nearly $52 million in state health care premium taxes and assessments in 2000, up 10.5 percent from 1999. The percentage of premiums that goes to pay state health care taxes premium has increased 758 percent since 1987. Premium taxes are levied only on fully insured health plan products; primarily small employers and individuals purchase these products. Federal law exempts self-insured organizations (many large employers, public employees and large group purchasers) from paying state premium taxes.
State statute requires Minnesota's health plans to submit reports on their financial status. The reports are independently audited to comply with generally accepted accounting principles, standards of the Financial Accounting Standards Board, and definitions and standards promulgated by the National Association of Insurance Commissioners and the State of Minnesota.
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