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Health Plan Premiums Fall Short of Expenses For Third Year

Reserves help to fill hole; Taxes reach nearly $219 million

ST. PAUL, Minn., April 17 PRNewswire-USNewswire — Doctor visits, hospital stays and other medical care costs reached $14.3 billion in 2007, an increase of nearly 7 percent, for Minnesota's eight nonprofit health plan companies, according to numbers released today by the Minnesota Council of Health Plans.

The industry posted combined losses of $71 million, making 2007 the third straight year of operating losses. The industry used interest income primarily generated from investing its reserves to cover the shortfall.

"The health plans are able to cover operating losses such as those experienced the last three years thanks to investments. Revenue generated from investments provides the cushion to withstand the cycles without dramatic cuts in benefits or even higher premium increases. Yet it isn't sound financial management to continue to rely on the unstable investment markets to cover rising health care costs," said Julie Brunner, executive director of the council.

Taxes up 26 percent

The industry paid more than $218.8 million in taxes and assessments, a 26 percent increase in the last four years. Taxes and assessments paid to the state of Minnesota are the second largest component of administrative costs.

"Taxes take a bigger bite out of the premium dollar than claims processing and customer service," said Brunner.

In addition to taxes and work required to operate the health plan, other administrative expenses included $72 million in community investments such as MN Community Measurement, Institute For Clinical Systems Improvement, health and wellness education, and other community benefit programs.

Medical care costs increase by nearly $1 billion

Ninety cents of every premium dollar was dedicated to patient care, while 10 cents was spent on administrative costs. The medical care spending for employer-sponsored and individual coverage include:

— 6 percent increase in inpatient hospital costs

— 13 percent increase in emergency services costs

— 10 percent increase in outpatient costs

— 5 percent increase in physician services costs

— No increase in pharmacy and medical supplies costs

Overall enrollment grows; small employer enrollment continues to drop

While overall enrollment grew less than 1 percent to more than 4.16 million, the number of people enrolled in fully insured small group plans (2 to 50 employees) dropped again, this time by nearly 10,000 individuals. Other enrollment trends include:

— Enrollment in Health Savings Account or Health Reimbursement Account (HSA/HRA) qualifying plans rose to 455,741 people or 11 percent of overall enrollment.

— HMO enrollment dropped nearly 3 percent.

— Enrollment in self funded plans grew 3 percent.

— Enrollment in Minnesota Health Care Programs (Prepaid Medical Assistance, General Assistance and MinnesotaCare, Minnesota Disability Health Options, Minnesota Senior Health Options and Minnesota Senior Care) sponsored by MCHP members grew slightly to 415,463 or 10 percent of overall enrollment.

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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