After years of decline, enrollment in Texas HMOs has increased 10 percent in each of the last two years, driving strong profits, according to the Texas Health Market Review 2013, an analysis of insurers and hospitals systems operating in the state.
Consultant Allan Baumgarten found that enrollment in HMOs contracting for the Medicaid and Children's Health Insurance Program has grown to more than three million, "with the largest HMOs in the state now national Medicaid/CHIP plans, such as AmeriGroup and Centene, doing business as Superior Health Plan, and Texas Children's Health Plan," he said in a recent news release.
Medicaid plans still lost $74.3 million in total on their operations in 2013. Four HMOs – Superior Health Plan, Molina Healthcare, UnitedHealthcare Community Plan and Community Health Choice – had combined losses of $161 million.
Meanwhile, enrollment in employer HMO plans has dropped to 500,000.
Medicare Advantage HMO plans have been the most profitable HMO line of business in Texas, with double-digit enrollment expansion. More than half a million Texas seniors are covered in HMO plans, led by UnitedHealthcare's senior plans with more than 200,000 members, the report said. As a group, these senior plans had underwriting income of $460 million in 2012, and UnitedHealthcare had $310 million of that.
The average operating margin for those plans was 7.4 percent and the average medical loss ratio was 82.3 percent. Cigna-acquired HealthSpring had underwriting income of $74.4 million.
Texas, however, will not expand Medicaid eligibility under the Affordable Care Act. By adopting the expansion, Texas could reduce the number of uninsured by up to 1.3 million over the next five years, according to estimates, creating a significant business opportunity for HMOs, since more than 6 million Texans are uninsured.
Hospital systems have continued to expand through mergers, acquisitions and new construction to enlarge their geographic footprint, improve efficiency and quality, and strengthen their negotiating ability with insurers. The largest deal was a merger of the Baylor Health Care System in the Dallas-Fort Worth area with the Scott and White system based in Temple.
To attract more patients in developing areas, hospitals are investing in building new patient towers, specialty centers and freestanding emergency departments, the report said. This construction frenzy has led to five acute care hospitals in Williamson County, north of Austin; five in The Woodlands area near Houston; and 14 acute and specialty care hospitals in Denton County, which includes parts of Dallas and Fort Worth.
Growth in inpatient utilization slowed 3 percent in 2011 as areas of the state increased the number of hospital beds, such as hospitals in Dallas-Fort Worth with 500 new inpatient beds in acute care hospitals since 2008.
But hospitals still experienced strong profits in 2011, according to the report. For example, hospitals in the Dallas-Fort Worth area had net income of $1.6 billion in 2011, which was 10.3 percent of net patient revenues, with Baylor and HCA the most profitable. Houston-area hospitals, led by HCA, reported net income of $1.8 billion in 2011, an average margin of 11.9 percent.