Bay Area HMOs Increase Profit Margins, CMA Study Finds
Average profit margins at the six largest Bay Area HMOs nearly tripled last year, increasing from an "anemic" 1.31% in 1999 to a "more robust" 3.53% last year, a report by the California Medical Association has found. The San Francisco Business Times reports that the study tracked revenues, expenses and profits at Kaiser FHP, HealthNet, Blue Cross of California, Pacificare/Secure Horizons, CIGNA Healthcare of California and United Healthcare of California. The report found that on average last year, the HMOs increased premiums between 8% and 12% and that revenue spent on medical care fell from 87.2% to 86.37%. Administrative costs dropped 12%.
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While financial analysts say the profits indicate that the HMOs are "doing quite well," CMA President Dr. Frank Staggers said, "The CMA continues to have major concerns as to the amount of health care funds that are being used for administration or placed in the profit column rather than providing for the care of patients." Since the report measures the "medical-loss ratio," or the percentage of premium dollars used for medical services, "opponents" of the report say the study does not offer a "true account" of the HMOs' financial allocations. Bobby Pena, a spokesperson for the California Association of Health Plans, said, "Medical-loss ratios suggest that all administrative costs are bad." He added that some medical programs, such as diabetes tracking and asthma prevention, are considered administrative expenses (Doherty, San Francisco Business Times, 4/16).