Blue Cross, Medica notch big growth in public insurance

UCare's pain over a lost state contract has resulted in big enrollment gains for two rival health insurers.

The HMO division of Blue Cross and Blue Shield of Minnesota added about 162,000 members in state public health insurance programs between December and January, according to new state data, while Minnetonka-based Medica added 120,000.

Minneapolis-based UCare, meanwhile, lost about 343,000 enrollees, according to a report posted earlier this month by the state Department of Human Services.

The numbers provide a first look at how the market is changing after UCare lost most of its massive contract with the state to manage care for the largest portions of the Medical Assistance and MinnesotaCare insurance programs.

For Blue Cross and Medica, the enrollment numbers suggest each company could see more than $1 billion in revenue from the public programs this year, according to a Star Tribune analysis. UCare stands to see about $60 million in revenue, according to the analysis, down from $1.5 billion in 2014.

"As expected, Blue Plus experienced significant membership gains in January as a result of the statewide bid," spokesman Jim McManus said in a statement, using the trade name for the HMO division at Blue Cross.

"It's too early for us to start speculating on what our costs will be related to an increase in revenue," said McManus, whose company's combined enrollment in Medical Assistance and MinnesotaCare more than doubled to about 258,000 people.

Last year, UCare eliminated 250 jobs because of the lost contract, which covers state programs that primarily provide health insurance to lower-income Minnesotans.

Blue Cross, meanwhile, is adding 70 workers and has opened a new office located near UCare's headquarters in northeast Minneapolis. On Tuesday, Medica said it has added about 30 jobs.

The state says the contract changes are saving state and federal taxpayers $450 million this year. UCare supporters, meanwhile, have argued that the public programs are losing the HMO's expertise in working with racial and ethnic minority communities as well as non-English speakers.

The Dayton administration moved to competitive bidding of contracts in the public programs a few years ago, following concerns that HMOs were making too much money on the business. It's too soon to say what margins might look like with the new contracts, but Medica expects they will be "very tight," said Geoff Bartsh, the company's vice president for state public programs.

"We submitted a bid anticipating very little margin and requiring us to do a better job managing costs in order to meet those margin expectations," Bartsh said in a statement.

In 2014, the HMOs at Blue Cross, HealthPartners, Medica and UCare collectively reported operating income of $135.2 million, with UCare earning nearly $100 million of the total, according to financial statements. That year, the HMOs collectively saw about $3.2 billion in revenue from the state public programs.

With the contract changes, Bloomington-based HealthPartners lost about 11,000 enrollees in the health insurance programs. There also were shifts in enrollment totals at four county-based organizations that the Department of Humans Services (DHS) hires along with HMOs to manage care for enrollees in the programs.

UCare currently has about 14,000 enrollees across MinnesotaCare and the largest portion of the Medical Assistance program. The HMO also covers another 36,000 people in smaller public programs for special populations.

Whereas UCare had been the largest managed care organization in the public programs, the distinction now goes to Medica, which saw its membership grow by about 75 percent to roughly 282,000 people. The HMO picked up most enrollment in counties like Hennepin, Anoka, Dakota, Scott and Washington, where it serves as the "default" plan, Bartsh said.

All public program enrollees have a choice in health plan options based on the county they live in, but people who don't pick a plan are assigned to the default managed care organization.

"By and large, whoever was the default carrier picked up the majority of enrollees who had to pick a plan," Bartsh said in an interview.

The share of enrollees assigned to the default plans was greater than expected, said Vince Rivard, a HealthPartners spokesman, in a statement. The high default rate of 75 percent "could be caused by some confusion among members," Rivard said.

The new contract marked the first time competitive bidding was used for all counties in the state at once. As a result, more people were shifting health plans at one time than ever before.

The shift on Jan. 1 came as DHS was struggling with troubles renewing coverage for people in the programs. The agency's call center, as well as the help line at the state's MNsure insurance exchange, were flooded with calls during the last week of December due to problems with state notices for MinnesotaCare and Medical Assistance enrollees who needed to continue their insurance.

About 64,000 people received termination notices in December, but the cutoff letters weren't sent in time to satisfy requirements that enrollees get 10 days' notice. Plus, the Star Tribune reported at the time that another 6,100 people in the MinnesotaCare program received termination notices even though they had submitted required paperwork for renewals to DHS.

On New Year's Eve, DHS announced it was extending coverage into January because of the problems. Affected enrollees were temporarily placed in a "fee-for-service" portion of the public programs for this month, which means many could wind up with one of the managed care organizations beginning in February.

"We hope they will have an opportunity to get back onto the programs and enroll in the health plan of their choice," said Rivard of HealthPartners, in a statement. "That will affect the state's overall numbers and ours as well."

Christopher Snowbeck • 612-673-4744

Twitter: @chrissnowbeck