CMA Releases 12th Health Plan Expenditures Report; Blue Cross Again Spends Least on Patient Care
[Posted 03/17/05]

CMA this week released its 12th annual “Knox-Keene Health Plan Expenditures Summary,” detailing the financial status of California’s HMOs. This year’s report shows that in 2003-2004 Blue Cross of California again continued to spend less than 80 percent of each premium dollar on medical care. Just 79.9 percent of its revenue went to patient care, with 20.1 percent going to administrative costs and profit.

“Once again this year, these numbers are staggering,” said CMA president Robert E. Hertzka, M.D. “Health plans should be spending their dollars treating patients, not lining the pockets of their shareholders with patients’ premiums.”

Blue Cross is the only large health plan that has consistently spent less than 80 percent of revenue on medical care since CMA issued its first report in 1994. Blue Cross again this year registered the highest executive compensation among publicly traded health plans. Leonard Schaeffer, CEO of Blue Cross parent company Wellpoint Health Networks, received more than $11 million in total stock, salary and other compensation.

Other plans that trail their competitors and spend the least on medical care are Aetna (80.9 percent), Blue Shield (81.5 percent), and Great West Healthcare (81.8 percent). In what has proven to be an embarrassment to the insurance industry, they refer to the percentages as the “medical loss ratio.”

Plans with the highest “medical-loss ratios”—those spending the most on medical care—are Alameda Alliance for Health (99.6 percent), CalOptima (97 percent), Partnership Health Plan (95.1 percent), and Kaiser Foundation Health Plan (92.8 percent).

Blue Cross last year merged with Anthem, creating the nation’s largest health plan. CMA opposed this mega-merger, calling upon state regulators to approve the deal only if patients were guaranteed substantial protections. CMA told regulators that such protections should include a requirement that the new merged company spend at least 85 cents of every premium dollar on patient care. CMA also asked that regulators block the egregious spending of up to $360 million on golden parachutes for executives, urging that the funds instead go to trim soaring premiums in California.

State Insurance Commissioner John Garamendi, who called the proposed merger “one lousy deal for California health care consumers,” later approved it after the companies agreed to invest at least $265 million in various health care programs around the state. Commissioner Garamendi agreed with CMA that the new plan must devote more premium dollars to patient care. To ensure this happens, Garamendi has created a “medical care ratio” index that he will use annually to audit the new health plan.

Click here to download a copy of CMA’s report.

Contact: CMA Media Relations, 916/444-5532 or leginfo@cmanet.org.