Gov. Mark Dayton said Tuesday that he has reached an agreement with four major HMOs to cap 2011 profits for the business they do with the state.
Department of Human Services Commissioner Lucinda Jesson said Blue Cross-Blue Shield, HealthPartners, Medica and UCare have agreed to cap their 2011 profits at 1 percent and will return any extra profits to the state.
The plans represent the major HMOs doing more than $3 billion in annual state business and covering more than 500,000 subsidized patients.
Jesson said she isn't sure how much money the state will receive next year, but said 2010 results show the state would have gotten back $85 million.
"This agreement, this 1 percent, one-time cap on profits really will save the taxpayers money and address the existing contract while we plan for the future," Jesson said.
Medica Spokesman Larry Bussey said his organization doesn't have any issues with Gov. Dayton's plan.
"First of all we think it's the right thing to do at this point in time, given the situation the state is in," Bussey said. "But also as a non-profit health plan, our stakeholders are the members and communities we serve. So this is an action that is directly consistent with our mission."
Health plans last week reported nearly 4 percent profits on state managed care contracts, up from 2.6 percent in 2009. But Bussey said it's hard to predict how much money the state will save.
"Our average over five years is 1.2 percent," he said. "So we often are very close to that 1 percent. But what this year will be, I just don't know."
Gov. Dayton encouraged HMOs to voluntarily return profits after UCare gave $30 million to the state last month.
UCare would have returned more to the state if last year's allowable earnings had been capped at 1 percent, senior vice president Ghita Worcester said. But she added that this year's profit will probably be lower because of changes in state reimbursements.
"The state's already done significant changes and booked savings in the budget for how they're handling the managed care products," Worcester said. "So it doesn't look like there's going to be from our perspective, significant dollars saved by this."
Worcester said her organization wants to help the state minimize any cuts to programs for low-income Minnesotans.
"We want to make sure there's enough money in the program and the benefit packages in place are appropriate, so people can really get quality care," she said. Worcester said if agreeing to the target with the state for one year is one step in helping to make that happen, then that's what they want to be doing.
Worcester said state managed care contracts already contain a 3.5 percent rate reduction for 2011.
Human Services Commissioner Lucinda Jesson said the state will start competitive bidding for the 2012 contracts, and she says that will also save the state money.