Priority posts loss GVHP in black

April 3, 2011
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Grand Rapids-based Priority Health’s health maintenance organization in March reported a net income loss of $7.16 million for 2010, compared to $17.8 million on the positive side in 2009.

“This is a small percent overall, but it’s a result we certainly take seriously,” CFO Greg Hawkins said.

The loss follows four straight years that ended solidly in the black. 2010 saw gains in membership and member months, but it was the third year that Priority Health experienced underwriting losses that, at $23.9 million, were more than seven times what the HMO saw in 2009.

“It’s a reflection of a number of things,” Hawkins said. “First would be the economy and continued rising health care costs. There are fewer employers that are offering coverage, especially in the small group market. What that does is it concentrates higher-risk patients into the insurance pool. So it’s more difficult for us to set premiums that cover our costs.”

Total revenue came in at $1.654 million, with all but $624,322 from premiums, according to the financial statement filed with the state Office of Financial and Insurance Regulation. The HMO spent 92.8 percent of premium revenues on medical expenses, Hawkins said.

The HMO, which represents the largest sector of Priority Health’s business, saw enrollment grow by 13.4 percent over 2009 to 432,079, as the organization pushes its geographic coverage and provider networks to the east.

“Overall, what we experienced is good growth, especially in our Medicare Advantage product,” Hawkins said. Priority Health reported 47,276 Medicare Advantage members by year’s end, up by more than 29,000 over 2009, while group membership was up by 21,369.

On a consolidated basis, including Medicare and PPO, Priority Health had 610,000 members at the end of 2010.

Priority Health’s Medicaid subsidiary, Priority Health Government Programs, recorded a drop in net income from $10.3 million in 2009 to $8.4 million in 2010. Both underwriting and investment gains slipped, while benefits and administrative costs increased.

Spectrum Health, Grand Rapids’ largest hospital, owns a 95 percent interest in Priority Health.

Blue Care Network of Michigan and Grand Valley Health Plan reported increases in net revenue over 2009.

BCN, owned by Blue Cross Blue Shield of Michigan, reported $103.9 million in net revenue. That’s based on a net underwriting gain of $79.4 million and net investment gains of $25.7 million.

The HMO’s lowest annual net revenue in the previous five years was $49.8 million in 2007.

BCN’s net underwriting gain more than doubled in 2010 from $34.4 million in 2009, and was more than 10 times the $7 million reported in 2006.

Membership grew from 525,226 at the end of 2009 to 532,705 at the end of 2010, up by 1.4 percent.

Grand Valley Health Plan, a small for-profit, staff-model HMO based in Grand Rapids, posted net income of $695,455, its first foray into positive territory since 2007, following two years of net losses that topped $1 million.

The HMO turned around major underwriting losses in 2008 and 2009 into a net 2010 gain of $238,393. Investment gains, while still lower than 2009, brought in $386,667.

Enrollment at the end of 2010 stood at 7,953 — 5 percent more than 2009. Still, that’s dramatically lower from GVHP’s height of nearly 20,000 members some years ago. In 2006, it was 11,700.

“We’ve had a good year in terms of managing care, and we didn’t get a substantial amount of high cost cases,” CEO Ron Palmer said.

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