Legal settlements and delayed care amid the pandemic drove a surge in operating income last year for Minnesota's nonprofit health insurers.
The COVID-19 impact was widely noted last spring as a shutdown in elective procedures caused use of medical services to plummet. For the year, per-person medical care expenses declined by 2%, according to numbers this week from the Minnesota Council of Health Plans.
Less visible were financial settlements with the federal government related to the "risk corridors" program in the Affordable Care Act (ACA). Blue Cross and Blue Shield of Minnesota, in particular, received more than $200 million through its settlement, which covered a portion of the insurer's losses from the early years of the federal health law.
Without the settlements for five health plans, "the operating gain as a result of their normal course of business for 2020 would have been ... a 35% reduction" compared with 2019, the St. Paul-based trade group said in a statement to the Star Tribune.
As a group, the seven insurers represented by the Minnesota Council of Health Plans posted operating income last year of $546.5 million, up 73% from the previous year's $316.7 million.
Nonprofit insurers in 2020 provided more than $1 billion in premium relief and cost-sharing waivers related to COVID-19 testing and inpatient treatment, according to the trade group. Even with the pandemic costs, it was a strong year financially for the health plans, said Allan Baumgarten, an independent financial analyst in St. Louis Park.
"I think there were additional expenses for care of COVID patients, but I think those were more than offset by the reduction of claims," Baumgarten said.
Numbers from the trade group include financial results for Blue Cross and six other insurers: HealthPartners, Hennepin Health, Medica, PreferredOne, Sanford Health Plan of Minnesota and UCare.
Eagan-based Blue Cross continued to be the state's largest nonprofit insurer. The company's health plans posted $183.2 million of operating income on about $6.6 billion of revenue, according to a Star Tribune review of regulatory filings.
The margin, which was an improvement over the previous year's operating loss at Blue Cross, was driven by a net gain of about $212.6 million from the risk corridors litigation.
To encourage carriers to compete in the health law's market where individuals buy coverage, the Affordable Care Act created the program to cover a portion of insurers' losses from 2014 to 2016. It worked by collecting a portion of income from insurers that made money in the new market, and distributing the funds among other to cover some of their losses.
When losses far exceeded payments, however, Congress said it would not fund the difference. Insurers sued and the litigation culminated with a judgment in favor of carriers by the U.S. Supreme Court.
"The Court held that ... the ACA established a money-mandating obligation, that Congress did not repeal this obligation using appropriations riders, and that the insurers could sue the federal government for owed payments," wrote Katie Keith, a health law attorney, in a blog for the journal Health Affairs.
During 2014-16, Blue Cross reported individual market losses totaling more than $500 million, the insurer said in a regulatory filing.
HealthPartners, Medica and UCare received smaller risk corridor settlements last year. The insurers stressed COVID-19 effects when explaining financial results.
For 2020, Medica posted $347 million of operating income on $4.4 billion in revenue. The operating margin was slightly lower than in 2019, but higher than expected, Medica officials said, given premium discounts the carrier provided last year.
"It's likely all carriers saw an improvement in financial performance in 2020 due to a slowdown in utilization early in the year," the Minnetonka-based insurer said in a statement. "Medica is no different."
Bloomington-based HealthPartners said claims were significantly lower than expected last spring due to COVID-19, but utilization bounced back during the second half of the year. Overall, the insurer saw operating income of $54.8 million on $4.4 billion of revenue — better than the company's operating loss for 2019.
"Our 2020 financial performance was largely impacted by unexpected changes to patterns of care as a result of the COVID-19 pandemic," HealthPartners said in a statement. It added, "We saw a significant rebound in claims in the third and fourth quarters, including our highest December claims volume in history."
After losing money on operations in 2019, Minneapolis-based UCare saw better financial results last year, posting $74.5 million of operating income on $4.1 billion of revenue. In a statement, the insurer said it paid fewer claims than usual "due to deferred care/closed clinics during the worst phases of the pandemic."
"Our strong earnings position UCare to be prepared for a resurgence of health care claims this year," the insurer said, "as well as to continue to cover care for members impacted by COVID-19."
Christopher Snowbeck • 612-673-4744