Government programs drove insurer earnings

Doing business with the government was a key source of income last year for Minnesota health insurers, but some of the money could be coming back to the state of Minnesota.

Operating income from state health care programs including Medicaid and MinnesotaCare jumped by about two-thirds to about $195 million last year, up from $117.4 million in 2013, according to a report Wednesday from Allan Baumgarten, an independent health care analyst in St. Louis Park.

The figures, which cover HMOs and county-based purchasing organizations, roughly line up with self-reported numbers released by the state's nonprofit health insurers in April.

"The government in Minnesota, even with competitive bidding and some other things they've introduced, is still paying the Medicaid health plans very well," Baumgarten said.

Enrollment in public health insurance programs grew substantially during 2014 as eligibility expanded under the federal Affordable Care Act.

Due in part to uncertainty about the health care needs of those gaining coverage under the law, contracts between the state and private insurers in the programs included provisions for retrospective severity adjustments.

"We are finalizing numbers with the plans, and we expect substantial dollars from them out of their reserves," said Lucinda Jesson, the state Human Services Commissioner, in a statement. "We will be announcing the final number later this month."

Minneapolis-based UCare accounted for about $99 million — just over half — of the income from state health insurance programs tabulated in the report released Wednesday. But company officials Wednesday said the process could result in UCare owing $30 million to the state, pending final settlements.

To manage care for public program beneficiaries, Minnesota hires UCare and the HMO divisions of three insurers: Eagan-based Blue Cross and Blue Shield of Minnesota, Bloomington-based HealthPartners and Minnetonka-based Medica.

Profitability from Medicaid plans has been "very strong" since 2009, Baumgarten said Wednesday.

Medicaid wasn't the only source of government earnings for insurers last year. Medicare health plans saw operating income grow to $186.7 million last year, up 20 percent from $155.2 million in 2013, according to Baumgarten's report.

"In the past five years, an increasing number of Minnesota seniors have opted out of traditional Medicare and selected Medicare Advantage and other private senior plans," the report states. "We think that the outlook for growth and profitability for Medicare plans is quite strong."

Christopher Snowbeck • 612-673-4613