42,000 lost small-group health coverage last year

More than 42,000 Minnesotans lost their small-group health coverage last year, while enrollment in state-sponsored public health plans surged by a nearly equal amount.

The state's HMOs attribute the shifts in health coverage to the bad economy and the rising cost of health care. Despite those factors, managed care organizations recorded an increase in income in 2009, according to two separate reports issued this week.

About 10 percent of small companies with 50 or fewer employees dumped their health coverage last year, the Minnesota Council of Health plans said.

"This is the biggest drop that we've seen in a number of years," said Julie Brunner, the council's executive director. Small employers have been shedding coverage for several years, but at much lower rates, she said. The recession clearly exacerbated the problem.

"A lot of it has to do with small employers having to make the choice of keeping people employed or keeping them employed and health care, which they couldn't afford," she said.

The Council's survey data from its eight nonprofit health plans does not reveal how all of those small business employees dealt with the loss of their insurance, but the number of uninsured Minnesotans did rise last year, and the number of people who qualified for government-supported health programs grew by 14 percent.

HMOs benefited from that huge growth in public programs, increasing their net income by $71 million, said independent HMO analyst Alan Baumgarten, based in St. Louis Park. He reviewed the publicly reported financial data submitted by Minnesota health plans last year and published his analysis this week.

Baumgarten said HMOs weathered the bad economy quite well.

"If I was an employer or if I was the state paying money for Medicaid, I would hope that some part of the profitability would be used to reduce the premium increase that I'm expecting for next year, or would be used for quality improvement, or would be used to improve payments to providers to the extent that they're being underpaid," Baumgarten said.

Julie Brunner doubts her members will lower their premiums.

"I don't think premiums are going to be lower because the premiums are a reflection of what the plans pay providers for health care and those rates continue to go up," she said.

Brunner said the average premium increase in Minnesota last year was between 5 to 8 percent. Meanwhile she says providers charged nearly 17 percent more for emergency services and 19 percent more for chemical dependency and mental health services.

Instead, Brunner predicts that HMOs will use their 2009 profits to rebuild their reserve funds. Right now the health plans have on average, just under 3 months of reserve funds - which she says is considered a minimum threshold.