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On June 24 th, Josephine Marcotty, of the Minneapolis Star Tribune, wrote an article about healthcare costs in Minnesota that I wanted to share with you. She indicated that according to a recent study released by Minnesota-Managed Care Review, healthcare costs rose 11.2% in 2004. This statistic was developed from results of the state regulated HMOs in Minnesota, which cover about one-fifth of the states’ insured. As a comparison, 2002’s increase in premium was 10%, and 2003’s was 8%. These HMOs underwrite almost all of the employers in the small group reform segment, which are employers with 50 or less employees. Many of you are in that category.

The article further states that the 11.2% increase was higher than actual expense to the plans that year, which was about 10%. The plans are attempting to stay ahead of escalating costs, which the article feels is a result of “newer and more expensive technology in hospitals and clinics, and because people are going to the doctor more often”. It also noted that the HMOs (all not-for-profit) reported net income up for the year.

My sense of things is based on two findings in the article. First, even though increased premium was higher than prior years, the actual expenses to the HMOs, was less than the increased premium. This means that they funded properly and we won’t have to make up under funding in future years. Second, the HMO’s increase in net income is a good sign. Because they are non-profit, and are highly regulated by the state, these earnings will be used to help defray, to some degree, future premium cost increases. Therefore, my sense tells me that we might have a year or two of more moderate increases going forward. Time will tell. Meantime, remember that we are always proactive on your behalf to find the least expensive alternative available to you. Together we can deal with this challenging expense.

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