Study: Calif. HMOs raked in $4B in profits


Some executives at California health insurance providers paid themselves handsomely while their companies were raking in more than $4.3 billion in profits in the last year.

In addition, HMOs spent $6 billion on administrative costs, which include hefty CEO salaries, according to a report by the California Medical Association, which said the money could have gone toward driving down premiums or better protecting the insured.

The annual report, which draws on expenditures reported to the state Department of Managed Health Care, will be released Tuesday.

It found that annual salaries topped $1 million for chief executive officers at providers like Aetna, Inc., CIGNA Corp., Health Net, Inc., UnitedHealth Group and WellPoint Health Networks, Inc.

The medical association is sponsoring a bill to require health plans to spend at least 85 percent of their annual income from the insured on health care.

“This report really underscores what we have been saying all along, which is there’s massive waste in the insurance industry,” said Sen. Sheila Kuehl, D-Santa Monica, who authored the bill.

“Californians are literally going into bankruptcy because of rising insurance premiums and having their benefits gutted simultaneously,” she said.

The report found that if the bill were already in place, nearly $1.1 billion dollars would have gone back to providing health care.

Of major providers, Indianapolis-based Anthem Blue Cross’ 4.1 million members see the smallest proportion of their premiums returned, with 79 percent of revenue used toward medical care.

“One of the worst ratios is Anthem Blue Cross,” said CMA President Richard Frankenstein. “They sent more than $1 billion back to Indiana last year and I don’t think that’s where Californians want to see their premium dollars go.”

Anthem Blue Cross said in a statement that as a for-profit business, it also pays more taxes than the nonprofit HMOs included in the study, which accounts for some of the difference in administrative costs.

“Anthem Blue Cross continually strives to reduce its administrative costs while also delivering innovative products to its members,” the statement said.

The report highlighted four major providers who already put more than 90 percent of revenue directly toward medical care: L.A. Care Health Plan (97.1 percent), CIGNA HealthCare of California (94.3 percent), Inland Empire Health Plan (93.1 percent) and Kaiser Foundation Health Plan (90.6 percent).

“We’re a not-for-profit so there aren’t any shareholders who get dividends or bonuses, so any net revenue is invested right back into facilities, services, and keeping our rates affordable,” Kaiser spokeswoman Kathleen McKenna said.

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