Despite decreased hospital utilization and a continued shift to outpatient care, pressure from payers to keep premium rates low has pushed down profits at California HMOs, a new study has found.
The study, conducted by Healthcare DataBank, a Santa Rosa, Calif.-based Managed care
managed-care research firm, showed average HMO profit margins declined to 3% in 1993 from 5% in 1991 because premium increases slowed to satisfy market pressures. The analysis found the average individual premium rate for HMOs in California was $118 in 1993.
The report, provided exclusively to MODERN HEALTHCARE, identifies and ranks 34 health plans using premium rate and other financial information reported to California's Department of Corporations, the agency that regulates managed-care companies in the state.
Data used for the study reflect information reported to the state in the third quarters ending Sept. 30 of the previous three years, making it the most current for California.
In 1993, HMO California was the state's least profitable health plan with a -17% profit margin. That attribute "may be a one-time occurrence," because the plan-which formerly operated as Greater South Bay HMO, covering 5,000 enrollees in Los Angeles-is investing heavily in expansion efforts into Orange County, said Joseph S. Coyne, Healthcare DataBank's chief executive officer.
Long Beach, Calif.-based Universal Care, a Medicaid HMO with 50,000 enrollees in Los Angeles and Orange counties, offered the least expensive premium rate of $89. The second lowest premium rate was posted by CaliforniaCare, a managed-care product of Woodland Hills-based Blue Cross of California, which has 503,000 enrollees.
The 10 HMOs reporting the lowest premium rates had rates lower than the state average of $118, Mr. Coyne said. Rates ranged between $89 and $112.
However, of the 34 health plans studied, those ranking 14th or higher, such as Santa Barbara, Calif.-based Freedom Health Plan, which covers 12,000 enrollees, had premium rates of $119 or more.
The most expensive HMO was offered by Rancho Cordova, Calif.-based Travelers Health Network, at a rate of $138.
Travelers also ranked as the most profitable HMO in the state, with a 21% profit margin.