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Michigan Health Market Review 2019

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July 16, 2020

Contact: Allan Baumgarten

Cell: 952/212-8589

Email: Baumg010@umn.edu Twitter: @AllanBaumgarten

 

Release

Michigan Health Market Review 2020 Finds:

Supersized Investment Revenues and Strong Medicaid Results Boost Michigan Health Plans to Record Profits in 2019;

Enrollment in Medicare Plans Grows by 15%

 

Michigan HMOs and insurers reported record profits in 2019, with Blue Cross Blue Shield doing very well with operations and investments. Results for the first quarter of 2020 were mixed, with a 2.9% gain in enrollment but with health plans posting combined losses.

Part One of Allan Baumgarten’s Michigan Health Market Review 2020 is released today and reports these and other findings about Michigan health plan companies. First published in 1997, this is the 24th edition of the report, which is an objective analysis of Michigan’s health care payer and provider markets. 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. Baumgarten is an independent analyst based in Minneapolis, who publishes report about health markets in Michigan and five other states and conducts research for a range of clients.

In this report, he finds:

  • Michigan HMOs reported net income of $481.8 million in 2019, down 4% from 2018. They reported an average profit margin of 2.7% compared to 2.9% in 2018. While their profit on operations declined, their investment income increased by $100 million. Molina Healthcare and the Priority Health HMOs were the most profitable. Blue Care Network and its Medicaid HMO saw their net income decline from $282 million in 2018 to $94.5 million in 2019, although $85 million of the change was due to expensing a contribution to the health endowment set up as part of the conversion of Blue Cross Blue Shield Mutual.
  • Medicaid plans increased their underwriting income (before investments and taxes) from $144 million to $205.2 million. Four had medical loss ratios below 80%, including Blue Cross Complete, Molina Healthcare and UnitedHealthcare Community Plan. Meridian Health, now owned by Centene, the largest Medicaid company in the country, lost $29.2 million in 2019, much better than its loss of $88 million in 2018.
  • Including its HMOs, Blue Cross Blue Shield Mutual of Michigan has 47% of the health insurance market here. It increased its profit by 61.8% in 2019, from $559.5 million to $905.3 million. Of that amount, “only” $165.5 million was from operations, while $507.4 million was from investments, and $225.4 million was a return of federal taxes paid previously.
  • Michigan HMOs and other insurers reported losses in the first quarter of 2020. That was not the result of higher medical claims. In fact the average medical loss ratio for HMOs was 81%, well below the average 83.7% in 2019. Instead, several reported losses on their investments due to the economic downturn, and others made advanced payments on their 2020 ACA health plan tax obligations. Even so, the profit outlook for the full year looks very good. The decline of claims and utilization because of the suspension of non-emergency surgeries and the reluctance of people to go in for routine or even acute care will more than offset additional costs of treating COVID-19 patients.
  • Enrollment in Michigan HMOs increased slightly in 2019 and by 2.9% in the first quarter of 2020. Medicare plans grew by 30,000 lives in 2019, while Medicaid plans decreased slightly, and commercial (individuals and employer groups) were flat. In the first three months of 2020, Medicare Advantage plans grew by 48,000 members and Medicaid plans added 22,000. In addition, Michigan Medicaid added 68,000 new members in April, May and June, as persons lost their employer group coverage.

Excerpts from the report, including the useful "Michigan HMOs at a Glance" page can be viewed at www.AllanBaumgarten.com. A subscription to Michigan Health Market Review 2020, including both 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

May 7, 2020

 

 

Michigan Health Market Review 2019, Part Two finds:

Net income and inpatient volume dropped for Michigan hospitals in 2018,

but health insurers enjoyed strong profits in 2019

 

            After three years of steadily increasing profits, Michigan hospitals saw a sharp decline in their net income and margins in 2018. The state’s health insurers, led by Blue Cross Blue Shield and its HMOs, enjoyed much stronger profits in the first nine months of 2019.

            Part Two of Michigan Health Market Review 2019, released today, analyzes the financial results, inpatient utilization trends and competitive strategies for the major hospitals and health systems in the state. Using Medicare cost reports from 2018 operations and other sources, the report contains detailed data by hospital and system on hospital finances and inpatient utilization for all general acute care hospitals in Detroit and suburbs and 66 hospitals in the rest of the state. The new report also updates enrollment and profitability data for Michigan health plans through September 2019. Among the findings in the new report:

  • After enjoying stronger financial results for three straight years, net income for Detroit area hospitals dropped sharply in 2018. In 2018, these hospitals had combined net income of $418.8 million or 3.4% of net patient revenues of $12.391 billion. That was down from net income of $694.5 million in 2017, which was 5.6% of net patient revenues. This was the first time in five years that their net income fell below a half billion dollars. Beaumont Health, with 30% of the market, reported net income of $261.8 million, down from $293 million in 2017. The Henry Ford hospitals lost about $14 million, while the Ascension/St. John hospitals saw their net income drop from $134.4 million in 2017 to a loss of $128.3 million, largely due to a major loss at the Providence hospitals.
  • Net income for hospitals in other parts of the state dropped by $1 billion in 2018, after increasing by about 35% in 2017 and 32.3% in 2016. In 2018, hospitals outside of the Detroit area had net income of $435.7 million, or 2.5% of net patient revenues. That was down from $1.488 billion in 2017, or 8.6% of net patient revenues and $1.104 billion in 2016. Their operating losses doubled to $1.153 billion in 2018. Net income was down for several large systems. For University of Michigan Health (including the MidMichigan hospitals), it dropped from $416.9 million in 2017 to $305.9 million in 2018. Net income for Spectrum Health was flat at $126.6 million, but the Trinity Health hospitals saw their net income drop from $333.7 million in 2017 to a loss of $239.5 million in 2018, mostly from a large reported loss at St. Mary’s in Grand Rapids.
  • Inpatient hospital days decreased again in 2018. Detroit-area hospitals provided about 30,000 fewer inpatient days in 2018 compared to 2017. Inpatient utilization has dropped steadily since it peaked in 2007, when Detroit-area hospitals provided 2.5 million days of inpatient care. The number of inpatient days covered by Medicaid increased from 473,000 in 2013 before Michigan expanded Medicaid eligibility to 549,000 in 2018. While Medicaid expansion improved hospital revenues and net income, hospitals are more vulnerable to proposed cuts in Medicare and Medicaid, which pay for nearly 80% inpatient days in Detroit-area hospitals.
  • 20 Michigan provider organizations participate in the Medicare Accountable Care Organization program, and some of them earned significant shared savings. In 2018, Michigan ACOs in the Shared Saving Program had 422,500 aligned beneficiaries and earned shared savings of $60.7 million. Three ACOs earned more than $15 million in shared savings that year.
  • Led by Blue Cross Blue Shield and its HMOs and Priority Health, Michigan health insurers reported increased profits in the first three quarters of 2019. Through September 2019, Michigan HMOs had net income of $514.3 million, or 3.9% of revenues, up from $410 million for the same period in 2018. Blue Cross Blue Shield improved its net income from $648 million to $719.5 million. Enrollment in Medicaid managed care plans dropped by about 27,000 in the first nine months of 2019.

            Part One of Michigan Health Market Review 2020 will be released in July. The 2020 report will be the 24th annual edition of our Michigan market analysis, first published in 1997.

Michigan Health Market Review 2019, Part One finds:

Michigan HMOs and insurers posted strong profits in 2018, with Blue Cross Blue Shield and its HMOs accounting for nearly 80% of the total.

These findings and others are reported in Part One of Allan Baumgarten's Michigan Health Market Review 2019. First published in 1997, this is the 23rd edition of the report analyzing Michigan's health care payer and provider markets. The Part Two report for Michigan, to be released later this year, will present his analysis of the financial performance, inpatient utilization and competitive strategies of the state's hospital systems, Baumgarten, an independent analyst based in Minneapolis, also publishes health market reports in seven other states.

Key findings in this new report:

* Michigan HMOs increased their strong 2017 profits by 10%, reaching a half billion dollars in net income. Although total premium revenues fell by about 3% HMOs increased their profits. The Blue Cross Blue Shield HMOs (Blue Care Network and Blue Cross Complete for Medicaid) increased their net income from $257.4 million in 2017 to $282 million in 2018, or 5.6% of underwriting revenues. The Priority Health HMOs increased their net income from $91.7 million in 2017 to $132.6 million, or 3.7% of revenues. However, Meridian Health Plan, which is the largest Medicaid plan in the state and was recently acquired by WellCare, posted losses of $88 million.

* The largest insurer in the state, Blue Cross Blue Shield Mutual of Michigan, reported net income of $559.5 million in 2018, up from $295.2 million in 2017 and a loss of $226.1 million in 2016. It was profitable in all its major lines of business, including commercial plans and Medicare. Combined with its HMOs, Blue Cross Blue Shield Mutual controls 48% of the Michigan health insurance market. * After years of losses, individual health plans were strongly profitable in 2018. Michigan HMOs, mostly Blue Care Network, increased their premiums by 30% and their underwriting income grew by $200 million. Similarly, Blue Cross Blue Shield also increased in premiums for individual plans and saw its underwriting income grow from $42.7 million to $78.7 million.

* With the significant exception of Meridian Health, Medicaid plans, were strongly profitable. They had underwriting income of $144 million, slightly more than in 2017. Three HMOs - Blue Cross Complete, Molina Healthcare and UnitedHealthcare Community Plan - had medical loss ratios below 80% and combined underwriting income of $173 million.

* Enrollment in Michigan HMOs dropped by 1.1% in 2018. While Medicare plans grew by about 26,000 lives, enrollment in commercial plans dropped by 4.2% or 44,000 lives. Medicaid HMO enrollment also decreased by less than 1%. At the same time, Blue Cross Blue Shield added 50,000 new enrollees in Medicare and employer group plans.

* Enrollment in individual health plans declined again in 2018. Individual enrollment, mostly in HMOs, dropped from 358,000 to 341,000 at the end of 2018. most of them in HMOs now. Blue Care Network is the largest insurer of individual plans, followed by Priority Health.

Excerpts from the report, including the useful "Michigan HMOs at a Glance" page can be viewed at www.AllanBaumgarten.com. A subscription to Michigan Health Market Review 2019, including both 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

 

Data Set Summary

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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"