For the second year in a row, HMOs in Minnesota, one of the country's managed-care birthplaces, suffered substantial losses.
Medica Health Plans, part of Minneapolis-based Allina Health System, and Bloomington, Minn.-based HealthPartners, both hospital-affiliated plans, sustained heavy operating losses.
Medica, which has 1.1 million enrollees, posted operating losses of $18.8 million in 1998-slightly better than its $23.9 million operating loss in 1997. Medica's investment earnings, though, helped push the health plan into the black by $14.3 million last year. That's up from an $8.5 million overall profit in 1997. Premium revenues were stable at $1.7 billion.
HealthPartners, made up of three health plans with a total enrollment of 789,000 in Minnesota, faced an even more difficult year than Medica. HealthPartners posted an overall loss of $5.7 million despite increased revenues of $1.45 billion, up 15% from 1997's $1.3 billion.
HealthPartners ended 1997 losing $9.9 million overall.
Like last year, rising medical and prescription drug costs outpaced premium increases. "We're in an era of incredible innovation in medical care, and the pace of change has accelerated," a Medica spokesperson said. "New drugs, increased use of existing drugs, new technologies, new medical procedures and other changes have increased the cost of providing care to our members, and our numbers reflect that."
The health plans were unable to adequately predict their expenses, said Michael Scandrett, executive director of the Minnesota Council of Health Plans.
The state's largest insurer, Blue Cross and Blue Shield of Minnesota, also faced ups and downs this year. The Eagon, Minn.-based health plan, which has 1.9 million enrollees, lost
$5 million on operations last year, in addition to incurring $60 million in nonrecurring charges such as Y2K costs.
However the company's bottom-line results last year were rescued by $434 million from the settlement of its lawsuit against the tobacco industry and by $38 million in investment income. The Blues plan ended the year with total earnings of $210 million on total revenues of $2.4 billion.
At the outset of the year, the plan had projected operating losses on continuing operations of $13 million. It lost $10 million on operations in 1997, but earned $35.9 million overall that year on total revenues of $1.9 billion.
As a whole, Minnesota plans experienced operating losses of $58 million and net losses of $6.1 million in 1998, compared with a combined operating loss of $54 million and an overall loss of $1.9 million in 1997, according to the Minnesota Council of Health Plans.