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Health care providers post bigger profits

ST. PAUL, Minn. (AP) — An audit finds that taxpayer-funded health care plans for low-income Minnesotans collected $207 million more than planned between 2002 and 2011.

The Star Tribune reported Friday that the extra revenue for health care providers that contract with the state through MinnesotaCare and Medical Assistance allowed them to post a 2.4 percent profit, which is twice the amount set by the state.

The Segal Group performed the audit at the behest of the Minnesota Department of Human Services after concerns were raised about the rate-setting process between the state and nonprofit health plans. The plans had an operating profit of $430.5 million on revenue of $18 billion for 2009-2011, or $206.9 million more in profits than had been expected.

The auditors called it "concerning" to see such a consistent pattern in which profits outpaced targets. In only two of those ten years did that not happen; instead, the plans lost money.

The auditors wrote that, over time, the results "should have called into question the data and/or methods being utilized."

The Department of Human Services ordered the audit in July to address longstanding concerns that the rate-setting process was convoluted and possibly fraudulent.

Premium rates set were actuarially sound, a legal requirement that means insurers have collected enough premiums to offset the cost of paying doctors and other providers for care, the report said. It also highlighted problems with a process that relies on self-reporting by the health plans. The Segal Group said the state should have been collecting its own financial information to set rates, not relying on self-reported summaries.

Administrative costs didn't seem to be under "any critical or diligent review," the report said. Auditors also found problems with historical data analysis that led to "systematic overstatement" of cost trends.

When state officials released a preliminary version of the report earlier this month, Department of Human Services Commissioner Lucinda Jesson faulted former Republican Gov. Tim Pawlenty's administration for what she said was its lack of rigor in the rate-setting process. Jesson, an appointee of Gov. Mark Dayton, said the report "raises serious questions about the failure of the previous administration to take action to address high health plan profit margins."

In 2011, the plans agreed to a voluntary 1 percent cap on profits that year, resulting in about $75 million being returned to the state. The state also implemented a competitive bidding process and other changes that Jesson said saved taxpayers over a billion dollars compared to pre-reform projections.

A federal probe of Minnesota's rate-setting process, which had drawn fire from both state and federal officials, remains unresolved. At question is whether the state may have set higher rates for Medicaid — the federal/state health care program for the poor — in order to subsidize a state-paid health plan that covers single adults who don't qualify for Medicaid.

Copyright 2013 The Associated Press.