CMA: Blue Cross Health Care Spending Ranks Last

Blue Cross of California in 2005 spent 78.9% of revenue on patient care, less than any other large insurer in the state, according to a report by the California Medical Association, the Los Angeles Times reports. According to the CMA analysis, Blue Cross provided coverage for 4.6 million members in 2005, with administrative expenses accounting for 11% of revenue and profit accounting for 10%.

The analysis found that the 10 health insurers with the highest medical loss ratio -- the percentage of patient revenue spent on medical care -- were not-for-profit companies, including Kaiser Foundation Health Plan, which spent 93% of revenue on health care in 2005. Five of the 10 insurers with the lowest levels of medical spending were for-profit, the report found.

Officials from Blue Cross, a unit of Well-Point, criticized the analysis' methodology. Spokesperson Robert Alaniz said the report was misleading because it includes as overhead some expenses that benefit members, such as disease management programs and agent commissions.

CMA officials criticized Blue Cross' level of health care spending and called for profit caps for HMOs. Under state law, administrative spending by HMOs is capped at 15% of revenue but there is no limit on profit levels.

Lawmakers rejected a bill this year that would have included profit in the 15% cap on administrative costs and required insurers to spend at least 85% of revenue on health care. CMA, which sponsored the legislation, said it would pursue the measure in the next legislative session.

Meanwhile, Insurance Commissioner John Garamendi (D) is creating a regulation that would require a premium rate review if an HMO's medical loss ratio dropped below a certain level. That level has not yet been disclosed (Girion, Los Angeles Times, 8/15).