Spending by HMOs Is Ranked
Blue Cross of California spent less on medical care last year, as a percentage of its patient revenue, than any other large health plan in California, a physician group said Monday.
By contrast, Kaiser Foundation Health Plan finished first among the state's five biggest health plan operators, according to the California Medical Assn., the state's largest physician group.
The report represents the association's latest salvo in a campaign to get a greater share of insurance premiums going to medical care and, of course, to doctors -- and less to profits and overhead.
Blue Cross, a unit of publicly traded WellPoint Inc., disputes the association's methodology and points out that the ratings have not scared away patients.
"We provide policies and plans that are efficient, customer focused, meet public demand and are reflected in our membership numbers," spokesman Robert Alaniz said.
Blue Cross spent 78.9% of revenue on healthcare for more than 4.6 million members in 2005, according to the physician group's annual analysis of health plan finances reported to the Department of Managed Health Care, which regulates health maintenance organizations.
Of the balance, Blue Cross spent 11% of revenue on overhead and put 10% of it toward profit.
The association's leaders criticized Blue Cross' relatively low level of healthcare spending -- known among insurers as their "medical loss ratio" -- saying patients would be better served if profit was capped, as overhead expenses are now.
Including Kaiser, the 10 health plans with the highest medical loss ratios last year were all nonprofits, the group said.
Five of the 10 operators with the lowest levels of medical spending were for-profits, it said.
"From the perspective of Wall Street, a lower medical loss ratio is great," association Chief Executive Jack Lewin said. "But, from the vantage point of a patient or a doctor or hospital, we look at it as a travesty. We believe more money should be spent on healthcare."
State law caps administrative spending by HMOs at 15% of revenue but says nothing about profit levels.
The doctor group sponsored a state Senate bill this year that would have lumped profit in the 15% cap as well, forcing insurers to spend no less than 85% of revenue on healthcare. The bill failed to get out of committee, but the group said it would pursue it in the next legislative session.
