The number of Colorado residents enrolled in HMO plans last year reached its lowest level in about a decade, as employers shifted to other plans or dropped insurance benefits.
At the same time, Denver-area hospitals “enjoyed their strongest profits in recent memory,” while employers and consumers paid higher premiums but received reduced benefits.
Those were among the key findings of the Colorado Managed Care Review 2006, to be released today.
The annual report is compiled by Minnesota health care analyst Allan Baumgarten. Among other sources, it relies on financial information from federal cost reports that hospitals participating in Medicare must file.
Enrollment in HMOs, or health maintenance organizations, has declined steadily since 2000, including a nearly 10 percent drop in 2005 to 1.03 million Colorado residents. That compares with a peak of 1.6 million people statewide six years ago.
The decline in HMO enrollment is occurring nationwide, said Jim Hertel, publisher of the Colorado Managed Care newsletter.
“Employers realized if they wanted to keep costs down, they had to switch to other plans,” Hertel said.
Baumgarten’s report stated that some employers have stopped offering insurance, or moved from comprehensive HMO plans to Preferred Provider Organization plans “and similar products that have thinner benefits and additional enrollee cost-sharing.” The report showed that Colorado HMOs had net income of $73.6 million in 2005, down from $107.5 million in 2004 and $192.3 million in 2003, the industry’s most profitable year.
That compares with the 1990s, when HMO enrollment soared but the plans “suffered years of high losses” because of “aggressive pricing combined with unexpected increases in medical costs,” the report stated.
Insurance premiums in Colorado jumped by 10.8 percent in 2005, higher than the national average of 9.2 percent.
Baumgarten predicted that employers and individual policyholders in Colorado could soon see insurance-premium increases moderate because of consolidation in the insurance industry and the construction of new hospitals.
He added that five new hospitals have been erected in Denver recently, resulting in some hospital beds sitting empty. That has given health insurers added leverage in negotiating contracts with hospitals over reimbursement rates. He pointed to the recent contract settlement between insurer United Healthcare and hospital operator HCA-HealthOne as an example.
“The pendulum has swung back to the HMOs in Colorado,” said Baumgarten, who prepares reports for eight other states.
Denver-area hospitals reported net income of $384 million in 2005.
HCA-HealthOne, the metro area’s largest hospital system, had net income before taxes of $267.5 million in 2005.
HealthOne spokeswoman Linda Kanamine said Baumgarten’s analysis overestimates profits because it does not take into account taxes, marketing expenses and other operational costs. She declined to provide alternative figures.
Nonprofit Exempla Healthcare posted net income of $74.4 million in 2005. Centura Health, also a nonprofit, had net income of $35.3 million from its Denver-area hospitals.
A study last year by Colorado for Health Care, a union-led group, described “the Denver hospital market (as) one of the most profitable in the nation,” based on 2003 data.
HCA-HealthOne posted an operating margin of 29 percent in 2003, while Centura had a 12 percent margin and Exempla a 6 percent margin in 2003, that study said.
Staff writer Will Shanley can be reached at 303-954-1260 or wshanley@denverpost.com.
