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January 6, 2021

Minnesota Health Market Review 2020, Part Two finds:

Health Insurers Report 16.5% More Medicaid Enrollees, Reduced Claims and Stronger Profits in 2020; Minnesota Hospitals Posted Continued Strong Net Income in 2019

            Enrollment in Minnesota Medicaid HMOs increased by 16.5% in 2020, and health insurers saw lower claims and higher profits. Twin Cities hospital systems reported strong net income in 2019, 15.2% higher than in 2018.

            Part Two of Minnesota Managed Care Review 2020, released today, presents a new analysis of hospital and health plan finances based on data from 2019 and the first nine months of 2020. The author, Allan Baumgarten, is a Minneapolis-based analyst who published his first Minnesota market analysis in 1990. He analyzes data from Medicare cost reports, health insurer quarterly and annual statements and other sources and shows some of the early impacts of the COVID-19 pandemic.

            The report analyzes data for 31 hospitals in the Twin Cities area, including four in western Wisconsin that are part of Minnesota systems, and 51 hospitals serving communities in outstate Minnesota. It includes detailed data on financial results and inpatient utilization for the state’s major integrated delivery systems, including Fairview, Allina and HealthPartners in the Twin Cities and Mayo Clinic, Essentia, CentraCare and Sanford Health in outstate Minnesota. The health plan analysis uses quarterly statement data for the first nine months of 2020 to show the impact of the COVID-19 pandemic on insurers, including Blue Cross Blue Shield, UCare and HealthPartners.

            In the new report, Baumgarten found:

  • Even with a high number of COVID-19 hospitalizations, Minnesota health insurers reported lower medical expenses and higher profits in 2020. In the first nine months of 2020, the average medical loss ratio for Minnesota HMOs dropped from 91.8% to 88.5% and their average profit margin increased from 0.3% to 3.7%, compared to the same period in 2019. Other insurers, including Blue Cross Blue Shield and Medica Insurance Company, reported that their average medical loss ratio dropped from 80.7% to 77% and their average margin grew from 6.4% to 10.3%. Medicaid HMOs, including UCare and Blue Plus, added more than 138,000 members, an increase of 16.5%.
  • Twin Cities area hospitals reported net income of $603.2 million in 2019, or 5.3% of net patient revenues. That was 15.2% higher than their 2018 net income of $523.5 million (4.7% of net patient revenues). The HealthPartners hospitals, including Regions and Methodist, had the best results: $182 million in net income, or 10.7% of net patient revenues. The M Health Fairview hospitals saw their net income decline by half from $133.5 million in 2018 to $63.2 million. The system has since closed Bethesda and downsized St. Joseph, which had combined losses in 2019 of almost $50 million. Net income for the Allina Health hospitals in the Twin Cities dropped from $220.8 million 2018 to $148.8 million in 2019.
  • Led by the Mayo Clinic and Sanford Health systems, hospitals serving communities in Greater Minnesota reported combined net income of $1.502 billion, or 11.2% of net patient revenues. The Mayo Clinic hospitals in Minnesota reported net income of $943.9 million in 2019, up from $848.6 million in 2018. The Mayo hospitals in Rochester alone had net income of $949.1 million, or 33.4% of net patient revenues. The Sanford Health hospitals reported net income of $272 million, up from $222 million, while CentraCare, with eight hospitals across central Minnesota, had net income of $102.7 million, half of its 2018 net income. The Essentia hospitals reported combined net income of $89.5 million, about the same as in 2018. While some hospitals, including Altru in Grand Forks and the University of Michigan, have delayed major capital projects, Essentia is moving ahead with its $900 million Vision Northland project.
  • Inpatient hospital days increased for the second year at Twin Cities hospitals, though not at the hospitals outstate. Twin Cities hospitals provided 1.551 million inpatient days in 2019, up 2.5% from 2018. On an average day in 2019, 72.1% of inpatient beds at metro area hospitals were occupied in, up from 71.6% in 2018. Hospitals serving the Twin Cities provided about 8,600 more days to Medicaid recipients in 2019 compared to 2018.

This is the 31st year that we have published Minnesota Health Market Review. Part One of the 2021 edition is scheduled for release in May. The Part One report will examine 2020 data on the enrollment trends and financial results of Minnesota health plans, including a fuller analysis of the impacts of the COVID-19 pandemic. Excerpts from the report and subscription information can be found at AllanBaumgarten.com

August 4, 2020                                                                                                    

Minnesota Health Market Review 2020 finds:

Medicaid health plans add 69,000 enrollees in 2020;

Profits for Minnesota health plans drop in 2019, but likely strong in 2020

            (Minneapolis-St. Paul) As tens of thousands of Minnesotans lost their employer-sponsored health insurance in 2020, Medicaid managed care plans added almost 70,000 new enrollees. Health plan profits dropped sharply in 2019, especially for Medicaid and individual plans, but are likely to rebound in 2020.

 

            These findings are reported in Part One of Minnesota Health Market Review 2020, released today by Allan Baumgarten. This is the 31st edition of the report, in which Baumgarten analyzes key trends and competitive strategies for organizations in Minnesota’s health care payer and provider markets. Part Two of the Minnesota report, to be released later this year, will present his analysis of the state’s provider systems and their strategies, financial performance and measures of inpatient utilization. The new report finds that:

 

  • Although enrollment in Medicaid health plans dropped by 3% in 2019, they added 69,000 new enrollees in the first half of 2020. As a result of the COVID-19 pandemic and the economic downturn, an estimated 56,000 adults in Minnesota lost their employer-sponsored coverage and are uninsured. About 150,000 others enrolled in Medicaid, including about 69,000 who have joined Medicaid HMO plans.

 

  • In 2019, enrollment in Minnesota HMOs grew by about 1% as Medicare plans added 48,000 new members but commercial and Medicaid plans lost members. Enrollment in HMOs grew to 1.366 million, with 67.3% of them in Medicaid and MinnesotaCare. Medica and UCare added the most new enrollees. Blue Cross Blue Shield lost almost 58,000 enrollees. Humana Insurance Company increased its Minnesota premiums by about $614 million to $1.084 billion, adding about 77,000 enrollees to its Medicare Advantage products.

 

  • After posting strong profits in 2017 and 2018, Minnesota HMOs reported losses of $70.2 million in 2019, or 0.7% of operating revenues. While Medica’s HMO had net income of $56.9 million, HealthPartners lost $86.1 million and UCare lost $31 million. HealthPartners did make money on its individual plans, benefitting from Minnesota’s reinsurance program. Net income for Blue Plus dropped from $141 million in 2018 to $7.1 million in 2019. Much of the was due to a drop in the profitability of its individual plans. Blue Plus lost $11.7 million on individual plans in 2019 after reporting underwriting income of $54.6 million in 2018.

 

  • Of the other insurance companies, Medica Insurance Company, which now sells individual plans in nine states, reported net income of $365.1 million in 2019. That is across all of its states, although Minnesota accounts for about 46% of its revenues. Its individual and group plans in Minnesota were very profitable, earning combined underwriting income of about $86 million. Blue Cross Blue Shield had losses of $77 million in 2019 and reported losses in three of the last four years. In its first full year, Allina Health Aetna Insurance lost $18.5 million, about half from its operations and half from amortizing an intangible asset, namely discounts on care provided by Allina hospitals and physicians. Allina-Aetna gained about 8,900 enrollees in 2019 and added about 4,000 Medicare Advantage members at the beginning of 2020.

 

  • Even though many health plans lost money in the first quarter of 2020, sometimes from investment losses, they should finish the year with good profits. Claims have been low so far, because non-emergency surgeries were suspended, and many families were reluctant to go to clinics for routine care or to hospitals for acute care.

 

            Excerpts from the report, including the “Minnesota Health Plans at a Glance” page can be viewed at AllanBaumgarten.com. Subscriptions to Minnesota Health Market Review 2020 in interactive PDF format, including both Parts One and Two, can be ordered and downloaded for $160.00 at www.AllanBaumgarten.com. Phone: 952/212-8589. E-mail address: Baumg010@umn.edu

 

Allan Baumgarten currently publishes reports analyzing health care payer and provider markets in Minnesota and five other states: Colorado, Florida, Michigan, Ohio and Texas. He conducts project research for a number of clients and has completed two studies of health plan and provider system strategies for the Robert Wood Johnson Foundation.

Data Set Summary
Report Contents

Part One
Introduction    . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
 . .
 . . 3
Market Structure      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 

Health Plan Companies     .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . . . . . . . . .4
Network Arrangements and Provider Systems     .  .                                    .  .  .  .  .  .  . . . . . . 7
Trend Review       . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 
Health Plan Enrollment   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . .  . . . . . . . 8
Individual Markets and MNsure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
State Healthcare Programs .  .  .  .  .  .  .  ..  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .   .  . . . . . . . . . . 11
Medicare Health Plans  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .   .  .  ..  . 13
Health Plan Net Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . . . . . . . . . . 14
Financial Results by Line of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Administrative Expenses  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .       21
Health Plan Capital. . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   23
A Look Ahead             . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25



Part Two
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 

Hospitals and Provider Systems. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 

Twin Cities Area Hospitals and Systems............................................................9
Revenues and Net Income .  .  .  .  .  ..  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . . . 10
Occupancy and Payer Mix .  .  .  ..  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . . . .12
Performance Bonuses and Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Outstate Systems and Hospitals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  .  14
Revenues and Net Income  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Occupancy and Payer Mix .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . .    .  .  .  . . . . ..17
Performance Bonuses and Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Health Plan Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . 21
 Enrollment by Region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  21
Utilization and Effectiveness of Care and Enrollee Satisfaction .  .  .  .  .  .  .  .  . . . . . .23
A Look Ahead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . .  . . 27

Media Coverage/Presentations
Minnesota Health Market Review 2018, Part One, released June 8: "Minnesota Health Plans Regain Profitability, Add Enrollees; New Competition Stirs for Medicare Health Plans"
  • Christopher Snowbeck wrote in the Minneapolis StarTribune: "Health Insurers Return to Profitability in Minnesota" Click here to view
  • Paul Demko wrote in Politico: "Massive financial improvement for Minnesota health plans last year." Click here to view.
  • Chistopher Snowbeck wrote in the Minneapolis StarTribune: "Health plans lost less on Medicaid last year." Click here to view
Minnesota Health Market Review 2017, Part Two, released March 27: "Net Income for Twin Cities Hospitals Drops by 19%; Health Systems Continue Growth, Consolidation and Partnership Strategies; Minnesota HMOs Regain Profits and Increase Enrollment by 8% in 2017"
  • Christopher Snowbeck wrote in the Minneapolis StarTribune: "Study: Big hospitals outside Twin Cities grow profits." 
  • David Montgomery wrote about the 2015 report in the St. Paul Pioneer Press: "Metro hospital profits fell in 2014, while outstate earnings rose"
  • Dan Diamond wrote about the 2015 report in Poiltico Pulse: "The Mayo Clinic had a nearly 18 percent profit margin"
Minnesota Health Market Review 2017, Part One, released June 9: "Minnesota Health Plans Go From Record Profits to Large Losses; Health Systems Push Ahead With Health Plan Strategies"
  • Christopher Snowbeck wrote in the Minneapolis StarTribune: "Operating Losses Swamp Investment Gains at Health Plans in Minnesota" Click here to view​​
Minnesota Health Market Review 2016, Part Two, released April 10: "Outstate Health Systems Increase Profits by 15%; Medicaid Covers More Hospital Days"
  • Christopher Snowbeck wrote in the Minneapolis StarTribune: "Study: Big hospitals outside Twin Cities grow profits." 
  • David Montgomery wrote about the 2015 report in the St. Paul Pioneer Press: "Metro hospital profits fell in 2014, while outstate earnings rose"
  • Dan Diamond wrote about the 2015 report in Poiltico Pulse: "The Mayo Clinic had a nearly 18 percent profit margin"

Minnesota Health Market Review 2016, Part One, released May 25: "HMO Profits for Public Programs Surpass $230 Million; Medicaid Enrollment Grows But Individual Market Remains Volatile; Hospitals Double Down on Health Plan Strategy"

  • Christopher Snowbeck wrote in the Minneapolis StarTribune: "Record HMO profits from state programs." Click here to view