South Country posts $21.1 million 2024 loss, urges rate fixes as ‘KARMA’ bill nears law

At the June 3 Wabasha County Board meeting, Scott Sheffman, chief financial officer of South Country Health Alliance, reported that the nonprofit plan recorded a $21,100,000 net loss for 2024 and established an $11,422,000 premium deficiency reserve related to contract year 2025.

The premium deficiency reserve (PDR) was booked in 2024 because actuaries project that capitation rates for 2025 are likely to be inadequate to cover expected claims. "We set up the PDR last year. So that basically made our 2025 budget a break even," Sheffman said, describing the accounting treatment that will release one-twelfth of the reserve each month in 2025 to offset expected losses.

The loss followed two years of record gains for the plan (net income in 2022 and 2023). Sheffman said South Country's loss ratio in 2024 was 96.9 percent, meaning about $0.97 of every premium dollar went to pay claims, leaving roughly 3 percent to cover administration and any margin. Administrative expenses were 8.9 percent of revenue and the plan earned about $4.5 million in investment income that year, Sheffman said.

Sheffman and other speakers attributed the 2024 results to multiple drivers: changes in enrollment after the end of the federal public health emergency led to higher-cost members remaining or returning (a so-called churn group); a retroactive inpatient claim repricing by the Department of Human Services (DHS) that increased hospital payments; and large uptake of newly-covered benefits, notably GLP-1 weight-loss medications and expanded adult dental coverage. Sheffman said the weight-loss drugs doubled in utilization each quarter in 2024 and that a 30‑day supply of brand drugs such as Wegovy or Ozempic “generally are in the $1,200 to $1,400 range.” He added that rebates flow to the state under the preferred drug list.

Leota, a South Country representative who presented alongside Sheffman, discussed a policy response the Alliance has been pursuing at the Legislature known as County Administered Rural Medical Assistance, or "KARMA." Leota said KARMA (House File 2955 and Senate File 3149) was included in the final omnibus bill and that the measure would create a parallel procurement path for counties that choose to participate. Under the proposed framework, counties could apply to operate a single-county plan with automatic enrollment of the PMAP population and an opt-out to fee-for-service, a collaborative rate-setting process with the state, and a risk corridor that would share gains or losses with the state beyond a narrow band.

"This model really provides some stability," Leota said, adding that the law would preserve county-based purchasing statutory requirements while creating a separate procurement and collaborative payment structure. She said the bill aims for more data integration and explicit language requiring the Department of Human Services to seek federal waivers if needed.

Board members asked about the potential interplay between a favorable KARMA outcome and an outstanding Minnesota Supreme Court decision related to county-based purchasing; Leota said a signed KARMA law would “probably reduce” the need for a court decision but that the Alliance would still prefer a court resolution to clarify statutory relationships. Sheffman said the plan will continue sharing utilization data with DHS and is hopeful for a mid‑year rate adjustment if the data justify it; South Country received a mid‑year increase in the prior year.

Why it matters: South Country is the county-based purchasing entity that administers Medicaid managed-care services for participating counties. Large, sustained losses or continuing inadequate rates could affect plan stability, county finances, or the structure of county-based purchasing agreements.

Next steps: South Country will continue monitoring 2025 performance as the PDR is amortized, and county officials said they will watch for final legislative action and the governor’s signature on KARMA and for any federal actions required to operationalize program changes.