California HMOs spent $6 billion on administrative costs in 2007, some of which could have gone toward driving down insurance premiums or better protecting the insured, according to an annual report by the California Medical Association slated for release today, the AP/San Francisco Chronicle reports.
The report, based on expenditures reported to the state Department of Managed Health Care, found the insurers made more than $4.3 billion in profits in 2007, and annual CEO salaries topped $1 million at at least five insurers in the state.
Anthem Blue Cross spent 79% of its revenue on medical care, the smallest percentage among major insurers, according to the report. In a statement, Anthem said that it is a for-profit business and that it pays more in taxes than the not-for-profit HMOs included in the study.
The report highlighted four health plans that spend more than 90% of their revenue on medical care, including:
- L.A. Care Health Plan, which spends 97.1%;
- CIGNA HealthCare of California, which spends 94.3%;
- Inland Empire Health Plan, which spends 93.1%; and
- Kaiser Foundation Health Plan, which spends 90.6%.
Bill To Cut Administrative Expenses
CMA is sponsoring a bill (SB 1440) authored by Sen. Sheila Kuehl (D-Los Angeles) that would require health plans to spend at least 85% of their annual income on health care.
The CMA report found that if the bill were already in place, insurers would have spent nearly $1.1 billion more on health care (Mohajer, AP/San Francisco Chronicle, 6/23).