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Minnesota Health Plans Reserves, Investment Income Down

Operations break even after $230 million of losses in past 3 years; Medical care spending, enrollment increase

ST. PAUL, Minn., April 21 /PRNewswire-USNewswire/ -- After three years of operating losses totaling more than $230 million, Minnesota's health plans posted combined gains of less than one-half of 1 percent of revenue (.39 percent or $65.9 million) in 2008 according to figures released today by the Minnesota Council of Health Plans. Spending on medical care continues to increase for Minnesota health plans, jumping 6 percent in 2008 to $15 billion.

State mandated reserves fell 7 percent as income from investments combined to total less than $11 million, a $195.5 million decrease from 2007. Reserves ensure that health plans can pay members' medical bills and invest in technology and other improvements even in tough economic times.

"The current economic downturn serves as a stark reminder of why health plans need rainy day funds," said Julie Brunner, executive director of the Minnesota Council of Health Plans. Minnesota health plans have about two months of expenses reserves, about $150 million less than last year. "Reserves have done what they are designed to do," she added, "provide stability in unstable times."

Demand grows for public programs, high risk pool enrollment drops

Enrollment in Minnesota's health plans increased nearly 3 percent from last year to more than 4.3 million. More than 455,000 Minnesotans are enrolled in state public programs -- an increase of 10 percent over the previous year. Public programs include Prepaid Medical Assistance, General Assistance Medical Care, MinnesotaCare, Minnesota Disability Health Options, Minnesota Senior Health Options and Minnesota Senior Care. In addition, enrollment in the Minnesota Comprehensive Health Care Association (MCHA), a health plan that guarantees coverage for high risk individuals, dropped to 26,224 enrollees, a 4 percent decline over 2007 numbers.

Other enrollment changes between 2007 and 2008 include:

  • Enrollment in Health Savings Account or Health Reimbursement Account (HSA/HRA) qualifying plans rose to 547,642 people, a 20 percent increase.
  • Enrollment in self funded coverage grew 4 percent.

Double digit ER spending, premium taxes increases continue

Nearly 90 cents of every premium dollar received were spent on patient care. The medical care spending changes between 2007 and 2008 in employer-sponsored and individual coverage include:

  • 17 percent increase in emergency services costs
  • 10 percent increase in inpatient hospital costs
  • 8 percent increase in outpatient costs
  • 6 percent increase in physician services costs
  • 0.13 percent increase pharmacy and medical supplies costs

These increases include the amount paid by the health plans, as well as the portion of the bill that was the individual's responsibility to pay.

Cost overruns in the statewide high risk pool triggered an 18 percent increase in the MCHA assessment, an administrative cost which, due to federal law, is paid by mostly small employers. While enrollment in the MCHA plan dropped 4 percent, the assessment on health plans to fund the medical care spending overruns reached a record high $127.6 million in 2008. Last year health plans paid taxes and assessments totaling more than $240 million, an amount nearly five times more than the industry's combined net income. With all health care premium taxes included, health plan administrative costs are now just under 11 percent of premium revenue. Without taxes, administrative costs are below 8 percent.

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.

SOURCE Minnesota Council of Health Plans
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