Minnesota's four largest health payers--Blue Cross and Blue Shield of Minnesota, HealthPartners, Medica and UCare--have agreed to limit profit margins on taxpayer-funded health programs to 1 percent of revenue in 2011. Any profit above that would be paid back to the state in April 2012, reports the Star Tribune.
The state department of human services didn't have exact figures for how much the agreement would save the state, but said that if the agreement was in place last year it would have meant a giveback of about $85 million. "Our managed care reforms will result in purchasing better care at better prices in the future," said Commissioner Lucinda Jesson, who negotiated the agreement, according to GovMonitor.
Just before announcing the cap, the insurers reported profits of 3.8 percent on 2010 contracts for taxpayer-funded health programs, up from 2.6 percent in 2009, according to Twin Cities Business. However, the plans say they have years where they lose money on state programs and years where they post profits. Blue Cross said its five-year average profit margin on state programs is negative 0.9 percent; Medica's five-year return is 1.2 percent; HealthPartners said it was "well below 1 percent." And UCare saw a 4.4 percent margin in that timeframe.
"We agreed to it because we want to be helpful and we thought this was a way to be helpful to the state at this time," Pat Geraghty, CEO of Blue Cross and Blue Shield of Minnesota, told the Star Tribune. Geraghty said he'd prefer the money go toward healthcare rather than general fund use and hopes attention can shift away from profits toward ways to reduce costs and improve care for patients. "It allows us now to move on the discussion of how do we put into play the long term infrastructure things, which is the conversation we really want to get to," he said.
Ghita Worcester, UCare's senior vice president of public affairs, echoed that sentiment. "One piece that's missing, there's a lot of work going on with plans working with providers to improve the quality of care and reduce costs. We want to make sure they're going hand in glove when we talk about all of this," she told the Star Tribune.