ST. PAUL, Minn. (AP) — Four large nonprofit health plans will return excess profits from public health care contracts to the state under a yearlong deal announced Tuesday by Gov. Mark Dayton.
Blue Cross Blue Shield of Minnesota, HealthPartners, Medica and UCare — the biggest of the health plans that contract to cover more than 500,000 subsidized patients — agreed to limit their 2011 profits from state business to 1 percent. Any earnings above that will come back to the state next year, flowing into the general fund and a special fund tied to the MinnesotaCare health plan for the working poor.
The profit cap is the latest development in the Democratic governor’s push to curb HMO earnings from public contracts. It comes a day after the state Human Services Department launched a website displaying financial details about health plans. In recent weeks, Dayton has ordered human services officials to introduce competition into the bidding process for next year’s managed care contracts, directed the Commerce Department to audit HMOs regularly and called for voluntary givebacks from the plans for past years’ profits.
Human Services Commissioner Lucinda Jesson said she and Dayton decided last week to focus instead on the current year’s contracts, after health plans reported 3.8 percent profits on 2010 state-managed care contracts, up from 2.6 percent in 2009.
In an interview, Jesson declined to predict how much the state might get next year. She said that won’t be clear until the plans close out their 2011 business and tally the numbers. But she said the state would be receiving about $85 million this month if a similar cap had applied to last year’s contracts.
“I do think this is a significant benefit for the taxpayers of Minnesota,” Jesson said.
Representatives for the health plans said the state’s projected $5 billion deficit in the next two years factored into the deal with Dayton.
“We believe this one-time contract amendment is appropriate given the state’s current financial situation,” said HealthPartners spokeswoman Amy von Walter.
“We think it’s the right thing to do at this time, and it’s really consistent with our mission as a nonprofit health plan,” said Larry Bussey, director of corporate communications at Medica.
A statement from Blue Cross said the insurer agreed to the deal “in order to help the state address its budget challenges, and to ensure that members in these programs continue to receive the coverage they depend on.”
UCare, which last month voluntarily gave $30 million back to the state, would have returned more to the state if last year’s allowable earnings had been capped at 1 percent, senior vice president Ghita Worcester said. But she added that this year’s profit will probably be lower because of changes in state reimbursements.
“We don’t think the bottom line for 2011 will be as robust as it was in 2010,” Worcester said.
Bussey said Medica’s earnings from public programs average 1.2 percent over five years, though the margin varies from year to year.
Jesson said this year’s profit cap will help even out the health plans’ substantial earnings from state contracts in the past two years.
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