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Michigan Health Market Review 2019

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July 30, 2021

Michigan Health Market Review 2021 Finds:

Confounding gloomy predictions, Michigan HMOs post record profits and increase enrollment in the year of COVID-19

 

Despite the turmoil of the COVID-19 pandemic, Michigan HMOs posted their highest profits ever in 2020 and increased their enrollment by 10%. In addition, they gained 117,000 new members in the first quarter of 2021, adding new Medicaid, individual and Medicare Advantage enrollees. A proposed lawsuit settlement could result in new competition for employer group business in the state and new opportunities for Blue Cross Blue Shield of Michigan in other states.

These findings and others about Michigan health plan companies are presented in Part One of Allan Baumgarten’s Michigan Health Market Review 2021, released today. This is the 25th annual edition of the report, first published in 1997. Baumgarten, a Minneapolis-based analyst, examines financial metrics and enrollment trends in Michigan and five other states and weaves that data together with insights about competition and strategies in the market. The Part Two report for Michigan comes out later this year and will focus on the state’s hospital systems and their financial performance, inpatient utilization and competitive strategies. Key findings in the new report:

Enrollment in Michigan HMOs increased sharply in 2020 and again in the first quarter of 2021. After decreasing slightly in 2019, Michigan Medicaid HMOs added 289,000 members in 2020 and 73,500 more in the first three months of 2021, reaching 2.1 million. Medicare Advantage plans grew by 67.000 lives in 2020 and added 9,400 lives in the first quarter of 2021. Meridian Health Plan, now owned by Centene, remains the largest Medicaid HMO here, and added almost 64,000 Medicaid members since January 2020.

  • Some of the growth was due to people losing jobs and benefits during the economic downturn, with some getting Medicaid coverage through the Healthy Michigan Plan and some 65 and older opting to enter Medicare. Some Medicaid enrollees retained benefits because states are not allowed to require reverification of eligibility under a federal law that increased Medicaid funding to states.
  • Michigan HMOs reported net income of $551.2 million in 2020, up 14.4% from 2019. They reported an average profit margin of 2.9% compared to 2.7% in 2019. Their operating income increased $225 million, although their investment income decreased by $142 million, The two Blue Cross HMOs and the two Priority Health HMOs had the highest profits, $144.6 million and $135.9 million, respectively, while the McLaren Health HMOs had the highest margin, at 5.3%. Blue Cross Blue Shield of Michigan had net income of $315.5 million, well below its extraordinary profits of $905.3 million in 2019.  
  • Medicare Advantage plans were very profitable, increasing their underwriting income (before investments and taxes) from $79 million in 2019 to $406 million. Blue Cross Blue Shield had underwriting income of $208.1 million, up from $98.3 million in 2019, and Priority Health had underwriting income of $134.8 million, up from $31.9 million in 2019.
  • Blue Cross Blue Shield and other Michigan insurers may face new competition, especially for employer group business. Blue Cross Blue Shield reserved $141 million to pay damages to employers based on a proposed settlement of a lawsuit brought against Blue Cross Blue Shield companies and their association. The settlement will relax rules that restricted how much Blue Cross Blue Shield plans could compete against each other in their franchise areas. Under the settlement, Anthem, Inc. will be able to approach Michigan employers for their business, while Blue Cross Blue Shield of Michigan will be able to compete against Blue plans in other states.
  • Ten Michigan health insurers received a windfall totaling $154 million as the result of a favorable ruling by the U. S. Supreme Court. These companies had posted large losses in 2014-2016 on individual plans, some of which should have been made up by the Risk Corridor program of the Affordable Care Act. Those amounts were not paid until October 2020. Most of it went to Blue Cross Blue Shield and Priority Health companies, while some went to two insurers that are no longer in business.

Excerpts from the report, including the useful "Michigan HMOs at a Glance" page can be viewed at https://allanbaumgarten.com/. A subscription to Michigan Health Market Review 2021, including Parts One and Two, can be ordered online at https://allanbaumgarten.com/product-category/michigan/ Or call 952/212-8589; E-mail address: Baumg010@umn.edu

Tuesday, March 30, 2021

Contact Allan Baumgarten, 952-212-8589

 

Michigan Health Market Review 2020, Part Two finds:

Michigan Health Plans Report Stronger Profits in First Nine Months of 2020;

Hospitals Increase Profits in 2019

 

 

            Michigan HMOs, especially Medicaid plans, reported lower medical costs and stronger profits in the first nine months of 2020 as higher expenses for COVID-19 patients were more than offset by reduced claims for surgeries and other care that was deferred. Hospital systems reported improved profits in 2019, recovering from a one-year downturn in 2018.

            Part Two of Michigan Health Market Review 2020, released today, shows how Michigan health insurers improved their profits in the first nine months of 2020 and analyzes financial results, inpatient utilization trends and competitive strategies for the major hospitals and health systems in the state. Analyzing data from Medicare cost reports for 2019 operations and other sources, the report includes financial results by hospital and system and measures of inpatient utilization for all general acute care hospitals in Detroit and suburbs as well as more than 60 hospitals in other parts of the state. Among the findings in the new report:

  • Michigan HMOs saw their medical loss ratios decline from 83.5% in the first nine months of 2019 to 80.3% in 2020. On a per member per month basis, their average medical expenses decreased by 2.4% during that period and their average profit margin increased from 3.9% to 4.6%. The three largest Medicaid HMOs, Meridian Health Plan, Molina Healthcare and UnitedHealthcare Community Plan, saw their medical loss ratios drop from 81.6% to 76.4%, their medical costs drop by 4.7% and their profit margins double from 2.5% to 5%. Other insurers, including Blue Cross Blue Shield Mutual, saw their medical expenses per member per month drop by 7%.
  • Medicaid HMOs added nearly 300,000 enrollees in 2020, with Blue Cross Complete adding 95,000 Medicaid recipients. Most enrolled in Medicaid after losing jobs and health benefits, but some of the gain was from Medicaid recipients who would have lost their benefits because they could not verify eligibility. However, the federal law that increased Medicaid funding to states barred them from dropping recipients.
  • For the fifth time in the last six years, Detroit-area hospitals had net income above a half billion dollars. In 2019, these hospitals had combined net income of $588.6 million or 4.5% of net patient revenues of $13.195 billion. That was down from net income of $679.3 million in 2017, which was 5.5% of net patient revenues. Beaumont Health, which controls 32% of the market, reported net income of $352.8 million in 2019, or 8.4% of net patient revenues. The Ascension hospitals, including St. John and Providence, had net income of $117.9 million while the Henry Ford hospitals lost $82 million.
  • Hospitals in other parts of the state saw their average margins increase from 2.5% in 2018 to 6.8%. These hospitals reported net income of $1.291 billion in 2019, or 6.8% of net patient revenues. That was much higher than $435.7 million in 2018 but less than $1.488 billion in 2017. The University of Michigan/MidMichigan hospitals reported net income of $305 million, about the same as in 2018, while the Trinity hospitals improved their net income to $307 million, or 15.3% of net patient revenues. The Spectrum Health hospitals in west Michigan increased their net income from $126.6 million in 2018 to $181.6 million in 2019.
  • Inpatient hospital days and occupancy rates for outstate hospitals decreased again in 2019. Detroit-area hospitals fewer inpatient days in 2019 than in 2018 and 2017. The number of inpatient days covered by Medicaid decreased slightly in 2019, although it is still well above the 473,000 days provided in 2013 before Michigan expanded Medicaid eligibility.

            Excerpts from the report and subscription information are available at www.AllanBaumgarten.com Part One of Michigan Health Market Review 2021 is scheduled for release in July and will analyze a full year of financial results for Michigan health plans. The 2021 report will be the 25th annual edition of our Michigan market analysis, first published in 1997.

 

 

HMOs at a Glance

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Michigan HMOs at a Glance

Data Set Summary
Report Contents

Part One
INTRODUCTION         3
Market Structure      4
Health Plans 4
Provider Systems 8
Trend Review 9
Health Plan Enrollment 9
Medicaid Managed Care  12
Medicare Plans 13
Net Income  14
Financial Results by Line of Business 17
Provider Payments  21
Health Plan Capital22
A Look Ahead 23

Part Two

Introduction 3
Market Structure  4
Market Analysis 8

Detroit Area Hospitals  8
Revenues and Net Income  10
Inpatient Occupancy and Payer Mix 12
Performance Bonuses and Penalties 14
Other Major Hospitals 16
Revenues and Net Income  16
Inpatient Occupancy and Payer Mix 16
Performance Bonuses and Penalties . 21
Health Plan Trends 21
HMOs Hospital Admissions  23
Health Plan Enrollment and Net Income 24
Medicaid Enrollment by Region  25
Effectiveness and Utilization of Care  26
A Look Ahead 28

Media Coverage/Presentations

MICHIGAN HEALTH MARKET REVIEW 2020, PART ONE,  RELEASED JULY 16, 2020: “SUPERSIZE INVESTMENT REVENUES BOOST MICHIGAN HEALTH PLANS TO RECORD PROFITS IN 2019; ENROLLMENT IN MEDICARE PLANS GROWS BY 15%”

MICHIGAN HEALTH MARKET REVIEW 2019, PART TWO,  RELEASED MAY 7, 2020: “NET INCOME AND INPATIENT VOLUME DROPPED SHARPLY FOR MICHIGAN HOSPITALS IN 2018; HEALTH INSURERS ENJOYED STRONGER PROFITS IN 2019”

  • Jay Greene wrote in Crain’s Detroit Business: “Report: Health plan profits drop first quarter, but experts project rose year ahead with more rebates.” Click here to read

Michigan Health Market Review 2018Part One to be released April 25. Get pre-publication special pricing and read Jay Greene's pre-publication reporting: 

  • Jay Greene wrote in Crain's Detroit Business: "Health plan enrollment, profits hit record highs." Click here to view


Michigan Health Market Review 2017, Part Two,  released February 27, 2018: "Detroit hospitals increase operating income by more than $100 million; Michigan health systems continue growth, consolidation and partnership strategies; Increased HMO enrollment boosts 2017 profits"

  • Jay Greene wrote in Crain's Detroit Business: "Hospitals, health plans posted strong margins for 2016-17, but future could be rougher" Click here to view​​

Michigan Health Market Review 2017Part One released July 19: "Medicaid plans add members but profits drop sharply; HMOs and insurers post large losses on individual plans"

  • Jay Greene wrote: "Michigan health plan profits drop in 2016 by 8% but enrollment up 5%." Click here to view​

Michigan Health Market Review 2016, Part Two,  released May 8, 2017: "Medicaid expansion helps Michigan health systems to best net income; HMO enrollment grows in Medicaid, Individual and Medicare plans"

  • Karen Bouffard wrote in the Detroit News: "Beaumont, DMC posted strongest profits ever in 2015." Click here to view
  • Jay Greene wrote in Crain's Detroit Business: "Report: Michigan hospitals, health plans post slightly lower, but still strong, profit margins in 2015" Click here to view​​

Michigan Health Market Review 2016, Part One released July 27: "Medicaid Expansions Adds 183,000 HMO Members in 2015 and 2016, Increases HMO Profits

  • Jay Greene wrote in Crain's Detroit Business: "Michigan health insurers post near-record profits in 2015." Click here to view
  • Karen Bouffard wrote in the Detroit News: "Michigan Medicaid HMOs earn highest profits in decade." Click here to view​​
  • Mark Sanchez wrote in MiBiz: "In first full year of under state Medicaid expansion, HMO underwriting income spikes 83 percent." Click here to read
  • JC Reindl wrote in the Detroit Free Press: "Affordabe Care Act rates may jump 17.3% in Michigan." Click here to read
  • Sarah Hulett reported for Michigan Radio: "Insurers asking for average 17% rate increase for individual plans." Click here for her report

Michigan Health Market Review 2015, Part Two,  released March 7, 2016: "Consolidated Michigan hospitals report higher profits even as inpatient days are flat; Enrollment in health plan surges but profits drop"

  • Jay Greene wrote in Crain's Detroit Business: "Michigan hospitals post impressive profit margins" Click here to view


Michigan Health Market Review 2015, Part One,  released August 12: "HMO Enrollment Grows Sharply; Medicaid HMOs Add Members and Improve Profits."

  • Karen Bouffard wrote in the Detroit News: "Enrollment up in Michigan Medicaid HMOs, individual plans
  • Jay Greene wrote in Crain's Detroit Business: "Operating income of Michigan Medicaid HMOs rises 295% in 2014"