More join local HMOs despite smaller market

November 30, 2009
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Two Grand Rapids-based nonprofit health maintenance organizations reported growth in the number of members as of 2009’s third quarter.

Priority Health this month reported its third consecutive quarter of membership gains, while Grand Valley Health Plan reported more members for the third quarter than for the second quarter, although still fewer than when the year began. But it’s a switch in the steady decline GVHP has endured over several years.

Priority Health CEO Greg Hawkins attributed the modest gain of about 2 percent in member months to enrollment growth in southeastern Michigan. In 2008, Priority Health bought a Detroit-area competitor in order to enter the market. The number of members has increased by 3 percent since the start of 2009, to 370,904.

Most of the gain came in the group market, although membership also grew in the Medicare Advantage category for those 65 and older. Individual memberships for the under-65 set were stagnant.

In its third quarter report to the state Office of Financial and Insurance Regulation, Priority Health listed year-to-date net income of $9.4 million, compared to $6.1 million net income through the first three quarters of 2008. Underwriting saw a net gain of $3.89 million, compared to a loss of $4.38 million during the same period last year.

Hawkins pointed out that the administrative cost ratio has dropped from 9.6 percent year-to-date in 2008 to 9.2 percent so far this year.

“We’ve spent a little less in total at the same time that we’ve gained membership,” Hawkins said. “This is one of the things we focus on, trying to be as administratively efficient as we can.”

He also said Priority Health spent 90.5 percent of its $983.5 million in premium revenue on hospital and medical services for its members.

Spectrum Health has majority ownership of Priority Health, which provides about half of the $2 billion health system’s annual revenues.

Blue Care Network of Michigan, a subsidiary of Blue Cross Blue Shield of Michigan and major competitor to Priority Health in West Michigan, saw a 4.9 percent decrease in the total number of members, as well as in member-months, since the year began, to 527,316.

Net premium income rose from $1.59 billion to $1.65 billion. Net income for the period was $22.76 million, down from $37.99 million last year.

The HMO posted an underwriting loss of $6.7 million through third quarter 2009, compared to a gain of $13.6 million last year. The loss was mitigated by higher net investment gains at $30.2 million, compared to $24.5 million in 2008.

BCN CFO Sue Kluge said net investment income has recovered from the market debacle of a year ago.

“While membership decreased somewhat, we are still maintaining and growing market share,” Kluge said. “The whole HMO market is shrinking. We continue to maintain our position.”

Kluge attributed higher premium income to increases in premium prices and to growing numbers enrolled in Medicare Advantage plans.

GVHP reported a net loss of $127,983, compared to a net loss of $843,863 in 2008, which was fueled by an extraordinarily expensive case. The net underwriting loss as of Sept. 30 was $546,122, compared to $2.17 million in the first three quarters of 2008.

“Through the third quarter, we were pretty much breakeven,” GVHP President and CEO Ron Palmer said. “Last year, we saw very high costs; this year, we’re not seeing high cost cases.”

The only HMO of its kind in the state, Grand Rapids-based GVHP staffs its own medical centers with physicians and other health care professionals.

In the third quarter, GVHP stemmed a slide in enrollment that extends back for several years. The HMO reported 7,665 members in the third quarter, or 146 more than in the second quarter. GVHP had more than 15,000 members at the start of 2006.

“We’re seeing a definite slowing down of the amount of members lost to businesses either going out of business or not being able to pay their premiums so they dropped health insurance,” Palmer said. “It seems to have leveled out a bit this year.”

Priority Health Government Programs, one of 14 HMOs that provide managed care for Medicaid recipients in Michigan, posted net income of $6.3 million through the third quarter.

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