California HMO Profits Exceed $4B, Study Finds

Main Category: Health Insurance / Medical Insurance
Article Date: 26 Jun 2008 - 7:00 PDT

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California HMOs made $4.3 billion in profits in the last year and spent $6 billion on administrative costs, according to a California Medical Association annual report released Tuesday, the AP/San Francisco Chronicle reports. The report is based on expenditures reported to the state Department of Managed Health Care.

The report found that the 4.1 million Anthem Blue Cross California members saw the smallest proportions of their premiums used for health care, with 79% of the company's revenue going toward care. In a statement, Anthem Blue Cross officials said that they are a for-profit company that pays more taxes than the not-for-profit HMOs included in the study. The report noted that Kaiser Foundation Health Plan, CIGNA HealthCare of California, Inland Empire Health Plan and L.A. Care Health Plan put more than 90% of their revenue directly toward health care.

CMA said that money spent on high administrative costs, including annual salaries of up to $1 million for CEOs at several companies, could have been used to reduce premiums or better protect the insured. State Sen. Sheila Kuehl (D) said, "This report really underscores what we have been saying all along, which is there's massive waste in the industry." Kuehl has proposed legislation that would require health plans to spend at least 85% of their annual income from the insured on health care. According to the report, nearly $1.1 billion would have gone back to providing health care if the bill were already in place (Tayefe Mojaher, AP/San Francisco Chronicle, 6/23).

The report is available online (.pdf).

Reprinted with kind permission from http://www.kaisernetwork.org. You can view the entire Kaiser Daily Health Policy Report, search the archives, or sign up for email delivery at http://www.kaisernetwork.org/dailyreports/healthpolicy. The Kaiser Daily Health Policy Report is published for kaisernetwork.org, a free service of The Henry J. Kaiser Family Foundation.

© 2008 Advisory Board Company and Kaiser Family Foundation. All rights reserved.

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