Enrollment Down, Profits Up for Oregon Insurers
Insurers are on pace to increase profits this year by 25 percent on higher premiums while fewer people have coverage
Regence suffered the biggest loss -- 17,507 members -- while only two insurers posted gains – ODS Health Plan and PacificSource. Regence’s numbers have been on a downfall since last fall when it lost the public school teachers contract to Providence Health Plan and ODS, representing 145,000 members.
Currently more than 1.8 million Oregonians have coverage from one of Oregon’s eight domiciled insurers. It’s unknown how many people who left these health plans sought coverage from a government program, an insurer outside Oregon or joined the ranks of the uninsured.
As for the financial health of Oregon’s insurers, we compiled the following information from the quarterly statements filed with the Oregon Insurance Division.
Altogether, Oregon insurs made $49.5 million in profit from January until June of this year, not including administrative overhead. In just the second quarter insurers made $29.3 million compared to $20.3 million in the first quarter and $76.4 million in all of last year. If this trend continues, Oregon insurers will net 25 percent greater profit this year than in 2008.
Kaiser Permanente turned in the highest net income for the first six months of this year, bagging $28.6 million in profit followed by PacfiCare and Providence, which had net income of $9.1 million and $8.8 million respectively. HealthNet and LifeWise fell into the red by June 30, reporting net losses of $2.6 million and $1 million respectively.
Looking at profitability, PacifiCare far outpaced the pack -- a pattern from previous years -- recording a 6.8 percent profit margin on June 30. Owned by UnitedHealth Group, this for-profit health insurer spent the least on medical expenses as a percentage of premiums, 76.2 percent, and the most on administrative costs -- $106.54 per member per month.
Kaiser Permanente and Regence BlueCross BlueShield, the two largest health plans, spent nearly the same amount of money, roughly $1.1 million, on total hospital and medical expenses although Regence had nearly twice as many members.
Total premium revenues and pharmaceutical costs were about the same as well. Regence’s 729,483 members paid $1.21 billion in total premiums, while Kaiser’s 466,136 members paid $1.19 billion in premiums. Regence spent $108 million on prescription drugs, and Kaiser spent $110 million.
Kaiser led the way in terms of its medical-loss ratio, the percentage of premium spent on medical care -- 95.2 percent. Kaiser has an advantage over its competitors; most of its physician are employees – rather than on contract – and Kaiser owns its medical facilities.
Providence Health Plan, the only other integrated health system, had a loss ratio of 90 percent followed closely by Regence with 88.3 percent.
In terms of administrative costs, nearly every insurer spent less during the second quarter than the first three months of the year. At the same time, most collected even fewer premium dollars as a percentage than the previous quarter. HealthNet for instance collected 1 percent less in premiums and reduced administrative costs by 8.8 percent.
Measuring administrative costs per member per month, insurers on average spent $22.36 in the first six months of this year. PacifiCare spent the most at $106.54 per member so far this year, and PacificSource spent the second highest at $32.05 per member.
Also of note:
- Kaiser spent $261,493,113 on medical office operations during the first six months of 2009, compared to $527,253,233 in calendar year 2008
- HealthNet estimated pharmacy rebates of $985,697 as of June 30 compared to $825,400 for the first half of 2008.
- PacificSource allocated $2,310,845 for deferred compensation on June 30 for its executives, and purchased Primary Health Inc. of Boise on July 31 and its subsidiaries Primary Health Network (a health insurance company domiciled in Idaho) and Riverside Benefit Administrators for an unknown amount. The health plan also has a majority interest in Idao Physicians Network.
For related stories on insurance company financials click here.
NOTE: Click on the chart below to view a clearer picture.
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Comments
This article makes little sense. There is not such thing as "profits before admin. overhead".
Having said that, the carriers did report net gains of nearly $50 million for the first six months. However, most of that gain (over 60%) was on investment income earned on reserves required by the state not on gains in those quarters. As we all know, last year was a less than desirable year with respect to investment income. Kaiser reported over $14 of their $28 million in investment income and Regence $15 million. Regence actually reported underwriting losses of over $10 million in the first 2 quarters. If this years results increase by 25% it will be due to investment income not net income gains.
The statement in the article is "profits...not including administrative overhead," which is the exact opposite of "before" admin overhead. The point is that they made $50 million in profit in addition to administrative overhead, which includes salaries and marketing. If insurers made gains on investment income then great, they can pass those earnings onto their rate payers, but I doubt that will happen.
You are correct I did misspeak. It was "not including". I didn't know that meant "after".
My point is that stating profits are up 25% over last year when last year was a poor year financially is disingenuous. It appears UW gains are in-line with 2008 and changes in net gains are a result of income investment. Again, 2008 was a bad year for investments.
With respect to passing on those earnings, it appears that the Blues are doing just that as both Blues carriers have reported large UW losses over the last several years. They are the largest individual policy writers in the state and those are bleeding the companies.
Your comments on differing administrative costs by insurer raises an interesting question. Do such higher costs ever translate into a better product for customers, or does this never happen? For instance, the time one spends on hold when one calls customer service will be reduced as the company hires more staff, but this will increase costs. It would be interesting to compare costs, administrative and otherwise, with the actual service that customers receive.
How come the ODS figures don't include their new OEBB account? I thought they added about 100,000 members late last year.
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