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.

(© Copyright 2011 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.)

Comments (20)
  1. Dr. Killdare says:

    Only because their profits are based on a cost analysis basis and they know it. How sad that the health of Americans is based on profits, rather than on medicine.

    1. Matt says:

      You mean thank goodness that it is… Why do foreign dignitaries come to the US to get medical treatment at Mayo?

      It’s the profit motive that drives innovation and new technology into the marketplace.

      The problem is the lack of completion that keeps these practices in line and drives better service.

      Unfortunately, the elected elite in this country would prefer carving out monopolies.

      1. Citizen says:

        @Matt. Foreign dignitaries come to Mayo because not only is it the best, it is one of the cheapest. 17th from the bottom in charges in the U.S. Mayo puts all of its profits back into research, technology, and good wages for its employees. A Mayo employee pays very little for insurance. Not even close to what is the usual cost for coverage. It can be done. The outrageous, and I do mean outrageous, amounts charged for health insurance in this country reflect the hidden profits and humongous salaries of the insurance CEO’s.

  2. Troy says:

    All hospitals and medicine should be forced to be run as nonprofits, not for profit. Something is wrong about an industry that makes money off of suffering and illness.

    1. Gordon says:

      In this state hospitals and hmo are non profit. If your employer is self insured than the company handling it (like Cigna) can make a profit. Look at how nice all of the hospitals are. They are non profit, but have incredible building funds. CEO does well, too

  3. selighon says:

    Suggest that the State routinely survey and evaluate the level of care being provided to HMO members subsidized by state funds. I can forsee that if HMO profit margins from state funded patients are restricted then the time and effort put into the care and treatment of this class of patients will be restricted as well.

    1. Harvey says:

      No health care professional would dare get caught treating one differently than another. It is called a lawsuit if there is a negative outcome.

  4. lmc says:

    Greed Based system never work for the people that are in desparate need for their services. I agree the all health based services should be profit based.

  5. Sue says:

    Liberals? What does it have to do with this? Perhaps you’re being sarcastic, but it’s not coming through. My husband took good care of himself, but at age 49 was diagnosed with acute leukemia. If the Republicans-controlled by business- get their way with health care, companies can deny those with pre-existing conditions. If our health care plan should change, we could not pay to take care of his severe health problems because of the leukemia WHICH HE DID NOT CAUSE. Republicans’ plan? Let him die?

    1. Walker says:

      Somebody must of axed the comment. Sadly many negative posters (not all conservatives are negative. Nor are all negative people conservative) must have never had anything negative happen to themselves or a family member. They may not understand the fix is only the start and there are many other things that happen as the result of a condition. Much more happens randomly than they could possibly imagine.
      The Republican plan does seem to be to bad for you. Many previous posters would say the same, and that you can never switch jobs/careers and be happy you have a job or career. Many, not all.
      Hope your husband is at least stable now. Good luck.

    2. Lisa Gonyea says:

      I don’t know any Republicans who are against protection for those with pre existing conditions

      1. Matt says:

        I am,

        You have to price preexisting conditions as a risk, just the same as someone with 5 speeding tickets gets priced higher than someone with none.

        What would stop you or Sue’s husband from waiting until they are sick and picking up insurance at the last minute for treatment? That’s an unsustainable model that has been set forth by the Obama administration.

        The problem is insurance is tied it employees, not individuals. If you have cancer, loose your job and need insurance you are out of luck. That’s the problem in this country with healthcare.

        Give the tax breaks to individuals to buy insurance not companies and open up insurance to be purchased across state lines and you would see dramatically lower prices and better service.

        In addition, those who are sick and have insurance would be covered and those who carelessly don’t have insurance and get sick would be stuck dealing with the ramifications of their actions.

        All is fair, unfortunately personal responsibility is lost in this country.

    3. Todd says:

      I hope your husband will be OK. I know people like him that were unfortunate enough not to have any insurance and a lot of people think they would be the type to go to the emergency room for a cough but they also got cancer and they had two part time jobs so they made too much money for assistance. I had a couple of routine procedures and WITH my insurance I had to pay about $1500. When I went to have one of them done they had people stacked up like cord wood, not even a place to sit down. Health care needs reform, most definately.

      Good luck to you and your husband, Any kind of cancer sucks and the cure is not an easy road.

  6. Janice says:

    Way to go Governor Dayton and UCare! Now that is real leadership. I do agree with “Selighon”….HMO’s will now look for ways to cut the time and effort into the care and treatment of these patients while still assuring they always get their 1% profit. There must be a watch dog system in place to guard against so called “creative cost accounting”.

  7. Alan says:

    Health care organizations work hard to get their members to do the right things. See the Blue Cross commercials for example. Discounts for gyms, life coaching are some of the things being done. They are not stupid in the terms they are getting lower costs by getting people healthier. Lower costs mean lower premiums which makes them more competitive in the marketplace. We do not know how the HMO got the cost down. I would hope like heck it was through aggressive management of the chronic conditions the programs more than likely serve.

  8. R says:

    Rather than give the money back to the state, why shouldn’t the health plans give the money back to the folks who paid their monthly premiums.

    In the following year, reduce the premiums by the amount of the overrun, so that there is no overrun the following year.

    1. TF says:

      No, why would money go back to those who paid it in, when it could be used to build more puiblic fountains.

    2. Randy says:

      @R The money came from the state

  9. Mark says:

    I’m sure their accounting gurus have been alerted to “cook the books”, showing no profit for 2011. There won’t be any $$ returned.

  10. kevin says:

    hmo’s steel from us, the state steels from hmo’s, do we have any say as to how our money will be spent by the state and how can we put the people running hmo’s in prison ?