The pandemic economy has stood out, in part, because it’s lifted certain industries and individuals, including some that seemed vulnerable to the downturn.
Health maintenance organizations, which provide health coverage to over 5.4 million Texans, are the latest example of players that benefited greatly in the early months of the pandemic.
Texas HMOs more than doubled their profit margins in the first nine months of 2020 as many customers chose to put off care during the public health crisis.
HMO Blue Texas, part of Blue Cross Blue Shield of Texas, earned almost $1.1 billion in net income for the first nine months of 2020, up from $432.5 million for the same period a year earlier, according to independent analyst Allan Baumgarten.
The Blue Cross unit, which covered over 521,000 Texans in 2019, accounted for half the total net income posted by Texas HMOs in the first three quarters of last year, Baumgarten said.
When the pandemic hit last spring, some analysts projected large losses for health plans because they believed medical claims would rise from COVID-19 and employers would trim health benefits to cut costs.
“For the most part, these fears were not realized,” Baumgarten wrote in his newly released Texas Health Market Review 2020.
It’s the 16th edition of his Texas report since 1998, and he publishes similar reports on five other states, along with studies on other health care topics.
Most of the 2020 report focuses on data through 2019, including state and federal data related to Medicaid and Medicare. That paints a pretty picture of providers’ financial health, at least before the pandemic hit.
The big three health systems in North Texas -- Baylor Scott & White Health, Texas Health Resources and HCA Medical City -- all posted double-digit profit margins in 2019. That continued a more than 10-year streak of strong profits in the region, Baumgarten said.
While his report does not include their results during the COVID year, he believes they performed well. They were in a strong position coming out of 2019 and after lockdowns stopped elective surgery and inpatient visits, hospitals received significant money from federal relief plans.
Many providers also trimmed their workforce during the past year and were aggressive in recruiting patients to return for the care they needed.
Baylor, Scott & White, for example, reported a strong rebound in operating income and profit margins for the quarter ended in September.
Baumgarten could break out partial 2020 results for Texas HMOs because the carriers report those numbers to the Texas Department of Insurance. And he said the HMOs’ results were a good proxy for the broader health insurance industry.
Over 5.4 million Texans get coverage through an HMO, including more than half through Medicaid plans. HMO Blue is easily the largest carrier for commercial HMO plans in the state.
As a group, the Texas HMOs’ average medical loss ratio — the share of dollars going to care, as opposed to overhead and profits — was less than 82% in the first nine months of 2020, Baumgarten reported. That’s 5 percentage points lower than the same period a year earlier.
The Affordable Care Act requires large plans to spend at least 85% of revenue on care. (The minimum for small group plans is 80%.) That means many people will eventually get rebate checks for the excessive payments, although the spending trends began to shift in late 2020.
“In the second half of the year, the pendulum swung the other direction and the deferral of care moderated with utilization levels eventually returning to nearly normal levels,” a Blue Cross spokesman wrote in an email. “During this period, benefit expenses also increased to cover pandemic-related costs such as testing, diagnosis and treatment. Additionally, throughout the pandemic, we took additional measures to support members, providers and our communities.”
He said other factors contributed to the insurer’s strong results, including increases in its Medicaid segment, moderate cost trends, a legal judgment and federal relief programs.
While most Texas HMOs reported stronger results in the first nine months of 2020, the profit margins at Blue Cross were far higher -- over 30% compared with an average of 6.5% for all HMOs. But even as a group, the 2019 margins more than doubled in ‘20.
“If I was an employer, I’d be asking some pointed questions of my broker,” Baumgarten said. “Because I’m looking at these numbers, and they show that I overpaid a lot in 2020.”
Most companies are looking forward on health care costs, not back, and they’re still worried, said Marianne Fazen, executive director of the Dallas-Fort Worth Business Group on Health.
Many of her group’s members are self-insured so they benefited from lower spending early in the pandemic, she said. But they’re expecting workers to rush back to providers for delayed care and health screenings — and bracing for the expense.
They want to maintain benefits without raising deductibles. Employers also are dealing with higher demand for mental health services, in part because of the pandemic, and that has companies pushing employee assistance programs, too.
“Everyone’s very concerned about what’s coming — the tsunami of additional care that will be needed because of what happened in 2020,” Fazen said.
