2003 Profits for HMOs Operating in Sacramento Area 605% Higher Than 2002 Profits

The six largest HMOs operating in the Sacramento area recorded combined net profits of more than $2.3 billion in 2003, up 605% from profits in 2002, the Sacramento Business Journal reports. Oakland-based Kaiser Permanente posted net income of $996 million on revenue of $25.3 billion in 2003, while Thousand Oaks-based WellPoint Health Networks posted net income of $935 million on revenue of $20.4 billion. San Francisco-based Blue Shield of California posted net income of $314.3 million on revenue of $6 billion in 2003. Overall, the HMOs' revenue rose 11% in 2003. Profit margins for 2003 ranged from a low of 2.1% for Health Net to a high of 5.2% for Blue Shield. Meanwhile, premiums this year are on average 12% to 14% higher than in 2003, according to the Business Journal. According to Ken Wood, chief operating officer at Blue Shield, the premium increases can be attributed to increased demand for services and greater utilization, rather than the pursuit of wider profit margins. However, Wood noted that HMOs' 2003 financial results were "a little more positive" than predicted because health care costs did not rise as quickly as expected. But businesses and some analysts remain concerned about HMOs' rising profits, given the rising premiums. "Our members don't have a problem with businesses making money, but they are deeply concerned that health plan margins appear to be rewarding their inability to restrain rising costs," Peter Lee, executive director of the Pacific Business Group on Health, said (Robertson, Sacramento Business Journal, 3/12).