ST. PAUL, Minn. – Minnesota health insurers reported a total of $687 million in operating losses last year according to a new report by the Minnesota Council of Health Plans.
The report analyzes yearly financial reports that insurance companies and health maintenance organizations are required to file by law on March 1 and April 1 of each year. The report combines data from those reports with numbers from people who get their insurance through large employers. The Minnesota Council of Health plans is a trade group for insurers.
The 2.7 percent operating loss in 2016 is the worst mark for the industry in the past ten years. Revenue from premiums rose four percent, but expenses increased six percent.
“While information throughout last year pointed to some financial problems, $687 million is a much bigger number than I expected,” Jim Schowalter, president of the Minnesota Council of Health Plans said in a statement. “Yet our medical bills got paid.”
Health insurers paid out for care at an average rate of $763 per second. Companies drew heavily on their state mandated medical reserves, taking out nearly $560 million in total.
The majority of the losses for the health insurance industry came on the public plan side of things. Health insurers spent $356.7 million more on plans covering care for children and families than the state paid into the system. State supported insurance for disabled and elderly persons cost the health insurance industry a further $17.4 million more than was paid in.
A new contract bidding procedure from the Minnesota Department of Human Services saved the state $450 million in payments. Insurers were paid less, but expected to cover the same level of services and expenses.
“The state wanted to save money and it did,” Schowalter said in the statement. “The aim for the future should be working together so that taxpayers, businesses owners, individuals— whomever is paying the bill— saves money, too. Those savings require finding ways to reduce the actual expense of care we need.”
The individual market saw 18 percent fewer people buy health insurance on their own compared with 2015. This contributed to a loss of $222.7 million for health insurers. This would have been a loss of $275.3 million if the federal government did not render aid that paid for some of the more costly medical expenses.