A report on California health plans' 1996 expenditures showed some plans devoted more than 95% of their premium dollars to medical care and others spent less than 60%.
Released last week by the California Medical Association, the report used financial data that plans reported to the state Department of Corporations.
The CMA said its reporting of plans' spending on medical care makes them more accountable to the public. Other healthcare experts, however, said that the percent of premiums spent on medical care isn't necessarily a reflection of quality.
Of plans with more than 10,000 enrollees, Santa Barbara-based Monarch Plan spent the highest share of its premium dollars on medical care, at 96.4%. Combined with administrative expenditures of 4.4%, Monarch outspent its premium dollars slightly in the year ended Dec. 31, 1996.
Since late 1994, Monarch has been contracting with other HMOs, such as PacifiCare of California, on a full-risk basis. Because it doesn't market or sell its own insurance product, Monarch has low administrative costs, said Gary Curry, its chief operating officer.
According to the report, other big spenders on medical care were Kaiser Foundation Health Plans, Oakland; Health Plan of the Redwoods, Santa Rosa; and Priority Health Services, Fresno.
Purchasers often use the report during contract negotiations, said Steven Thompson, vice president of government affairs for the CMA. That's caused health plans to be more conscientious in their spending on medical care. What's more, patients believe they're getting better care if a greater share of premium goes to medical care, he said.
Many healthcare experts said that perception is wrong. "You can't simply say that just because someone spends more money on medical care, their care is better," said Barry Scheur, president of Scheur Management Group, a Boston-based healthcare management and consulting firm. "It could be that they have a sicker population or they are not charging enough for their product."
Alameda Alliance for Health, based in San Leandro, returned the least amount of premium dollars to medical care, at 58.6%, in its fiscal year ended June 30, 1996. The not-for-profit public health plan, which had 21,800 enrollees in 1996 and serves only the Medicaid population, spent 29.8 cents of each premium dollar on administration and recorded 11.6 cents as income.
Alameda said the figures reflect only its first six months of operation and include its start-up costs. "In our next fiscal year, with enrollment much higher, administration costs were less than 9%," said Nina Maruyama, director of development and goverment relations. Maruyama said Alameda had 74,700 enrollees by June 1997.
Other plans reporting lower expenditures on medical care are CaliforniaCare Health Plans, Woodland Hills; Care 1st Health Plan, Los Angeles; Tower Health, Long Beach; and United Health Plan, Los Angeles.
Of the five lowest spenders, including Alameda, two are new plans and four have fewer than 100,000 enrollees.
Thompson said size plays an important role in expenditure allocation. "The larger the enrollment, the easier to achieve economy of scale," he said.
But CaliforniaCare, with 982,900 enrollees, is one of the largest plans in the state. Also, three of the top plans have fewer than 100,000 enrollees.