Big Government Brings Big Profits To Texas Health Plans

Michael Millenson

Posted 12/11/11 on Forbes

Governor Rick Perry of Texas speaking at the R...While Texas Governor Rick Perry rails against the evils of  federal involvement in health care on the GOP presidential campaign trail, businesses back home are busy raking in record profits from government dollars.

“By largely exiting the employer market and focusing on Medicare and Medicaid, Texas HMOs have enjoyed strong and growing profits in the last six years,” concluded the newly issued Texas Health Market Review 2011, an analysis of financial filings by state plans. It added, “HMOs here now are focused on the niche businesses of Medicare and Medicaid, both of which were strongly profitable in 2010. Overall, Texas HMOs reported net income of $404.1 million in 2010, or 3.3% of underwriting revenues of $12.41 billion.”

The Medicare Advantage plans are providing a particularly important bottom-line advantage, accounting for three-quarters of underwriting profits at plans such as PacifiCare, owned by UnitedHealth Group‘s United Healthcare, andHealthSpring, about to be bought by CIGNA.

Amerigroup (like United and CIGNA a publicly held corporation) and Texas Children’s Health Plan (a non-profit) were the most profitable Medicaid HMOs, together reporting a total of $80 million in underwriting net income.

A recent New York Times editorial suggested that the federal government overpays for Medicare Advantage (also known as Medicare Part C), noting that these privately run plans cover roughly a quarter of all enrollees but “cost an average of 10 percent more than what the same coverage would cost in traditional Medicare.” In a letter to the Times in response, Karen Ignagni, president of the trade group America’s Health Insurance Plans, rejoined that the plans provide more comprehensive benefits than fee-for-service Medicare.

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