HMOs in Minnesota Choose to Give Back

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April 5, 2011; Source: Bloomberg Businessweek | Over the past few months, NPQ has been covering some of the excesses of nonprofit insurers – both in terms of salaries and financial reserves. In short, the fact that some nonprofit insurers are paying very high compensation both to execs and to boards, and the fact that a number have been building record reserve levels, rankles many in the context of large state budget deficits and rising health care premiums. This has sparked a discussion about how much is too much to have in reserve.

In March we covered the fact that the governor of Minnesota was asking the health maintenance organizations doing big business with the state to voluntarily give back to state coffers some of their reserves. The state has a $5 billion deficit to address. At that time, one of the four HMOs in question had already given back $30 million.

An agreement was announced Tuesday that the four health plans will pay the state any profits over 1 percent made on state contracts. The plans made 3.8 percent profits on their state contracts last year, up from 2.6 percent in 2009.

The agreement came just one day after the state’s Department of Human Services published financial details of the four organizations on its website and after the governor ordered human services officials to introduce competition into the bidding process and directed the department to audit the HMOs regularly. So while it is “voluntary” the situation was not without its pressures.

A study by the consumers Union titled, “How Much is Too Much?” (PDF) has acted as background for much of the press’ reporting on this issue. Kudos to them for an effective use of research.—Ruth McCambridge