Sept. 08--HMOs in Minnesota once again enjoyed strong profits during 2011, according to a report released Friday, Sept. 7.

As a group, the state's health maintenance organizations reported net income of $230.4 million last year on nearly $7 billion in revenue, said Allan Baumgarten, a health care financial analyst in Brooklyn Park. That works out to about 3.3 cents of profit per dollar of revenue, said Baumgarten, who releases an annual report on health plan finances.

The results were down slightly from 2010, when Minnesota HMOs as a group earned $264 million, or 3.6 cents per dollar of revenue. Baumgarten's net income figure includes earnings from both health plan operations as well as investments.

A one-time cap on earnings for 2011 reduced HMO profits from their work with the public health insurance programs operated by the state of Minnesota. Even so, financial results for the industry were "excellent," Baumgarten said.

"If you look over the last 15 years, I think Minnesota HMOs have only been above 3 percent average profitability in just three of those years," Baumgarten said in an interview. "Two of those years were 2010 and 2011."

Minnesota hires HMOs and county-based purchasing groups to manage care for patients covered in the Medicaid and MinnesotaCare health insurance programs. Questions have swirled at the state Capitol for more than a year about whether the HMOs might be making too much profit from the public program business.

Baumgarten's report

shows that during 2011, public programs accounted for 53.6 percent of the revenue generated by HMOs and county-based purchasing groups. But with the one-time cap on earnings, the public program business generated only 32 percent of the HMOs' profits.

Minnesota's largest health insurers, including Blue Cross and Blue Shield of Minnesota, HealthPartners, Medica and PreferredOne, sell coverage through both HMO and insurance company subsidiaries. The number of commercial customers who purchased HMO coverage from the companies declined once again during 2011.

In April, a trade group for local health insurers called the Minnesota Council of Health Plans released comprehensive financial results covering the companies' HMO and insurance company subsidiaries. The numbers showed that health insurers as a group in 2011 saw operating income grow by 21 percent last year to $355.7 million on $19.8 billion in premium revenue.

The trade group attributed the profit jump to an industrywide trend of patients using less care than expected due in part to the slow economy.

Christopher Snowbeck can be reached at 651-228-5479. Follow him at twitter.com/chrissnowbeck.

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