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(St. Paul) ... Spending on care for patients by Minnesota's health plan companies jumped 15 percent in 2002, the largest increase in recent history. According to reports filed today with state regulators, health plans spent $5.7 billion in 2002 on payments to hospitals, clinics and others who provide medical care.
Premium increases averaged 12 percent in 2002, in comparison to 13 and 16 percent jumps in previous years.
"It is easy to understand why premiums are rising when you look at the continuing increases in spending on patient care year-after-year. Premiums are a direct result of the cost to provide care and they are being driven mostly by new treatments, technology and drugs," said Julie Brunner, executive director of the Minnesota Council of Health Plans, a trade group representing Minnesota's managed care companies.
Other trends in the annual filings include:
- Per person spending jumped to $2,374, a 15 percent increase over 2002
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Overall commercial enrollment remained steady
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Enrollment in government-supported health care coverage increased
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Administrative costs averaged 8 percent of premium revenue
Margins tight, reserve decreases
The industry as a whole finished in the black with an operating gain of 0.92 percent of revenue, the result of fierce competition to keep premiums down, Brunner said.
"That margin is much too close for comfort and has already had a negative impact on reserves which are there to protect consumers," she said. "HMOs need to offer employers more choices in the types of coverage they can buy. Employers are demanding it. Rising premiums can be slowed if HMOs are allowed to work with employers to design plans which feature various deductibles and co-pays."
Operating gain, by law, must be placed in reserve. Minnesota's eight nonprofit health care companies collected a total of $6.3 billion in revenue in 2002. State law addressing HMO solvency requires that as an industry health plans maintain a cumulative reserve between $370 million and $1.1 billion, enough to pay between one and three months of operating expenses. This reserve protects consumers from a company's financial shortfall. As spending on care increases, so must the dollars in these funds. Currently, the industry holds $680 million or 1.98 months of operating expenses in reserve. In 2002 the industry contributed $84.6 million to the statutory reserve, including $26.7 million from investment income. One company, Sioux Valley Health Plan, finished the year in the red, dipping into its reserve to cover expenses.
2002 enrollment steady
Enrollment was 2.4 million, 0.05 percent less than 2001. This decrease is largely due to employers switching from traditional HMO coverage to products that offer more employee cost sharing in deductibles and co-pays, Brunner said. While overall enrollment dropped, enrollment in publicly supported health care coverage such as Medicaid, General Assistance Medical Care and MinnesotaCare increased 12 percent to 407,250.
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.
Established in 1985, the Minnesota Council of Health Plans is a trade association of eight licensed nonprofit health plans. Council members have pioneered a style of health care that has improved quality and consumer satisfaction and expanded access to health care for all Minnesotans. The council and its members are leaders in health care reform, practice guidelines development, technology assessment and data collection and analysis.
For information about an individual health plan's numbers, contact:
Monika Strom
(651) 662-6889
Karl Oestreich
(651) 662-1502
Blue Plus
Eagan, MN
Cathy Nevanen
First Plan of Minnesota
Duluth, MN
(218) 529-9957
Sara McFee
HealthPartners
Bloomington, MN
(952) 883-5301
Gary Reagan
Medica
Minnetonka, MN
(952) 992-8081
Bonnie Hays
Metropolitan Health Plan
Minneapolis, MN
(612) 337-7160, office
Marcus Merz
PreferredOne
Golden Valley, MN
(763) 847-3201
Ruth Krystopolski
Sioux Valley Hospitals and Health System
Sioux Falls, SD
(605) 328-6801
Ghita Worcester
UCare Minnesota
Minneapolis, MN
(612) 676-3634
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