Michigan Managed Care Review 2005 - Part One

Even as Michigan HMOs enjoyed their most profitable year ever, health plans and employers alike are moving to benefit arrangements that allow more consumer cost-sharing. Medicaid HMO, especially national investor-owned companies, continued to grow in enrollment and importance.

These and other findings are included in Part One of Michigan Managed Care Review 2005, Allan Baumgarten's ninth annual report analyzing key trends and issues in the Michigan health care market. This new report analyzes the financial results and enrollment trends of health plans in the state. In Part Two of the report, to be released later this year, he will compare HMOs on other measures and analyze hospital performance, purchaser initiatives and other developments in the market.

In this report:

• Michigan HMOs had net income of $262.2 million in 2004 or 3.8% of $6.8 billion in underwriting revenues. HMOs made $215.8 million on their operations plus another $34 million on their investments. That compares to $200.7 million in net income in 2003, which was 3.1% of revenues.



• On average, premium revenues in HMO commercial (employer-sponsored) plans increased by 10.5% per member per month in 2004, from $212.02 to $232.37. That was the fourth straight year of double-digit increases; premium revenues increased by an average of 9.5% in 2003, 15.9% in 2002 and 11.6% in 2001.



• In 2004, the average spread between premium revenues and medical expenses for commercial HMOs grew to $32.37 per member per month. That is up from $31.32 in 2003, $21.39 in 2002 and $14.03 in 2001. On average, commercial HMOs saw their medical costs increase by 10.7% in 2002.



• For the second year in a row, Medicaid plans had net income of about $53 million. They had net underwriting income of $53.3 million in 2004, benefiting from increased payment rates and increased federal funding. In 2002, they lost $11.4 million. Three of the largest Medicaid HMOs in the state are national, investor-owned companies: Molina Healthcare, Great Lakes Health Plan (bought by United HealthGroup) and OmniCare (acquired by Coventry Health).