Five Largest HMOs in California Have $2.2B More in Reserves Than Required, State Figures Find
California's five largest HMOs have financial reserves totaling $3.15 billion, $2.2 billion more than necessary to meet the Department of Managed Health Care's minimum standards for financial viability, according to information filed with the state, the AP/Ventura County Star reports (Liedtke, AP/Ventura County Star, 12/6). HMOs are required by state law to have enough money in reserve to cover the cost of "unforeseen medical expenses," the Sacramento Bee reports (Rapaport, Sacramento Bee, 12/6). However, some health care experts say the excess reserves held by Kaiser Permanente, Blue Cross, Health Net, Blue Shield and PacifiCare are a "sign of runaway greed," the AP/Star reports. HMOs in California have been raising premium rates over the previous two years, with some consumers' out-of-pocket costs rising by more than 20% this year. Meanwhile, more premium increases are expected next year, the AP/Star reports. "It's one thing to make sure your company is solvent, but that doesn't mean you should be allowed to get fatter while you're gouging people," Jaime Court, executive director of the consumer advocacy group Foundation for Taxpayer & Consumer Rights, said. HMO officials defended the large reserves, saying members should "draw comfort" from them because they could act as a "rainy day fund should times get tough," the AP/Star reports. Walter Zelman, executive director of the California Association of Health Plans, said, "To say any plan has too much in reserve is absurd. Things can change very quickly, as we have all learned from looking at business and government in the last couple years" (AP/Ventura County Star, 12/6).
Meanwhile, consumer advocates yesterday called on state legislators to enact a law that would prevent HMOs with "vast cast reserves" from raising premiums unless state regulators deem the increase necessary, the Bee reports. California currently does not regulate health insurance premium increases. According to the Bee, there is no bill yet, and no state legislator has volunteered to write or sponsor such a bill. According to Jerry Flanagan of the FTCR, if the bill does not garner a sponsor or become law, the foundation will seek to place an initiative on that ballot as early as 2004. "It is outrageous that HMOs continue to gouge businesses and consumers while they hoard our premium dollars," Flanagan said (Sacramento Bee, 12/6).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.