Minnesota HMOs still losing

Minnesota health maintenance organizations increased their average per-member premium revenue but continued to lose money, according to the recently released Minnesota Managed Care Review 1999. The review, the tenth annual report assessing the Minnesota health care market, is a competitive analysis of health plans in the state.

The study found that:

•Â HMOs' premium revenues for commercial (employer) plans increased by an average of 9.9%.

•Â Despite those increases, Minnesota HMOs lost $9.6 million, or 0.3% of $2.9 billion in revenues in 1998.

•Â HMOs increased profits on their Medicaid plans from $25.9 million in 1997 to $33.8 million in 1998.

•Â Enrollment in insured HMO plans declined by about 45,000 in 1998.

According to Allan Baumgarten, the independent research analyst and health care policy and finance consultant who authored the report, the findings of the study may also reveal national trends. "In Minnesota and a number of other markets, we're seeing some large employer groups going not from preferred provider organizations to HMOs, which was sort of the conventional wisdom, but, in fact, going the opposite direction – from HMOs back to PPOs, something more lightly managed," he said.

To counter the loss of membership that this employer-driven shift would bring, Baumgarten said HMOs will start diversifying into other products: "You'll see more HMOs wanting to perhaps add these lines of business – PPOs and other more lightly managed care – so if they have unhappy customers, they can say, 'Wait a minute, we have other products in our line… that maybe address some of your concerns.'"

The problem with this diversification, however, is that HMOs may not have the right skill sets to offer other types of managed care products. "That might be one of the factors that distinguishes the companies that are going to be successful… and [the ones] that are going to have serious problems," Baumgarten said.

The results of the study reveal a cloudy horizon for HMOs. "HMOs are still under a lot of pressure both on the profitability, premium and medical cost side," Baumgarten said. "Plus, customers are raising questions about the value they get from their HMOs. It all adds up to a very challenging time for HMOs." PR