Health Insurers Make More, Cover Fewer People

The 2010 financials for Oregon health insurers paints a troubling picture as nation grips for reform
The Lund Report
March 28, 2011 -- Oregon health insurers covered fewer people and made more money last year than in recent years past according to the year-end financial statements submitted to the Oregon Insurance Division.
 
Compared to 2009, Oregon’s top eight health insurance companies covered 1.5 million people last year – down 14 percent – and made more than $207 million in net income – more than double what they earned previously.
 
Overall profit margins, meanwhile, averaged 3 percent, and about 88 cents of every premium dollar was spent on medical costs.
 
Cheryl Martinis, spokewoman with the Oregon Insurance Division, said the majority of insurance financial gains in 2010 resulted from investment income – some $127 million. The rest, she said, came mostly from the large group or Medicare markets, which the Insurance Division does not have authority to regulate.
 
“They’re not making money in the markets we regulate,” Martinis said. “They are making very little if anything in the rate requests we see.”
 
The Division approves rates only for the individual and small group markets. It could scale back rate requests in those markets, which it has down in several recent cases, but there are dangers, Martinis said.
 
“If rates are too low than what they actually need, at some point down the road they will have to jump up,” Martinis said.
 
The year-end financial statements also come with the public reporting of executive compensation. Mark Ganz, president and CEO of Regence BlueCross BlueShield, was the state’s highest paid health insurance executive. He earned $632,404 in Oregon and $748,140 in Washington for a combined $1.38 million in total compensation. Ganz also earns a salary as head of the Regence plans in Utah and Idaho, however those financial records are not available to the public.
 
Andrew McCulloch, regional president for Kaiser, earned more than $800,000, increasing his salary by 56 percent, while Jack Friedman, CEO of Providence Health Plans, was the third highest paid executive, taking home $678,013, representing a 33 percent increase.
 
Based on the financial documents submitted by insurers, 40 Oregon health insurance executives earned more than $200,000 each last year.
 
The state’s top eight health insurers collected nearly $7 billion in premium revenue and spent $6.1 billion on hospital and medical costs including $683 million on prescription drugs. Close to $500 million went to administrative expenses and $238 million on claims adjustments.
 
Kaiser Permanente received the most premium dollars – $2.5 billion – followed by Regence, which collected nearly $1.9 billion. Though Regence continued to shed members, now down to a little over 500,000 enrollees, it earned the most net income with more than $75 million at the end of the year, matching its earnings from 2006. More than two-thirds of those gains, however, were off investments. 
 
LifeWise was the only insurer to end the year in the red. It reported a $4 million deficit. LifeWise President Majd Fowzi El-Azma earned more than $400,000 in total compensation last year.
 
For previous coverage click here.
 
For more Oregon health insurance salaries click here.

Health Plan Members Net Income Net Investment Gains Premium Revenue Prescription Drug Costs Total Hosp/Medical Expenses General Admin Costs Claims Adjustment Expenses Profit margin Medical loss
Regence BCBS of Oregon 513,522 $75,158,557 $56,377,696 $1,892,922,218 $208,383,088 $1,560,421,394 $174,187,396 $122,198,162 4.0% 82.4%
Kaiser Health Plan of the Northwest 461,373 $39,486,783 $25,786,054 $2,469,151,111 $240,107,627 $2,369,082,017 $118,475,639 $25,384,847 1.6% 95.9%
Providence Health Plan 179,788 $54,658,768 $25,289,493 $980,489,404 $96,500,716 $880,647,522 $37,439,654 $35,191,520 5.6% 89.8%
PacificSource Health Plan 183,233 $8,134,728 $5,965,642 $582,966,063 $54,064,668 $493,099,186 $68,459,200 $16,519,543 1.4% 84.6%
Health Net of Oregon 88,786 $16,606,808 $3,213,056 $363,756,046 $35,312,477 $295,109,630 $36,930,716 $11,317,140 4.6% 81.1%
ODS Health Plan 63,478 $3,580,211 $4,818,529 $216,412,855 $21,912,155 $201,964,285 $7,874,068 $6,509,104 1.7% 93.3%
LifeWise Health Plan of Oregon 56,221 -$4,185,255 $5,072,908 $189,476,152 $12,997,997 $157,350,861 $28,402,232 $15,817,317 -2.2% 83.0%
PacifiCare of Oregon (UnitedHealth Group) 20,032 $13,775,916 $1,041,514 $221,937,187 $13,723,076 $150,679,659 $26,808,620 $5,095,814 6.2% 67.9%
Total 1,566,433 $207,216,516 $127,564,892 $6,917,111,036 $683,001,804 $6,108,354,554 $498,577,525 $238,033,447 3.0% 88.3%
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Comments

The numbers submitted by Kaiser are obviously cooked. There is absolutely no way whatsoever those crooks had a medical loss ratio of > 95%.

Thanks for the info. A few other observations show that the unsustainability of private health insurance for members and their employers continues to deepen & is related both to insurer choices about income sources and administrative costs including claims adjustment. While in both 2009 and 2010 investment income was the majority of net income, in 2009 it was 78.1% of net income, leaving 21.9% from premiums, while in 2010 it investments were 61.6% of net income, leaving 38.4% from premiums. This rise in the proportion of income derived from premiums is reflected in the figures that while the number of members declined 14%, premium income declined only 7.1%. In other words, these top 8 insurers shed members while raising premiums on the remainder. These data don't tell us what benefits members got for those premiums but we know from other sources that in many cases deductibles and/or co-pays and/or co-insurance rose and/or out of pocket maxima. That rise in the mean average premium income per member was $314, from $4091 in 2009 to $4405 in 2010. That rise of $314 premium income per member was an increase of 7.7%. According to the Bureau of Labor Statistics Consumer Price Index Inflation Calculator, CPI inflation from 2009 to 2010 was 1.64%. If premium income had risen at the same rate as the general CPI rate of inflation, the mean average per member would have risen $67 rather than $314. Total premium revenue would have been $6,513,228,414 rather than 6,917,111,035 ($4158 X 1,566,433) or about $404 million less than actual premium revenue. In 2009 general administration + claims adjustment expenses were 10.0% of premium revenue; in 2010 they were 10.6% of premium revenue. That amounted $411 mean average per member in 2009, and $469 per member in 2010. Chris Lowe

Chris Lowe just doesn't get it. Certainly price has something to do with the decrease in membership. The economy has placed more individuals in a position where they can't afford health insurance (also healthcare). Healthcare costs have gone up well over any CPI index, which is artificially being kept low by government for their own reasons and generally doesn't include gasoline and food. With fewer members to average costs the cost per individual will go up even if the companies cut administrative expenses. Generally, more people who actually use the care will continue and those who don't use the coverage will drop out. The key factor is the medical loss ratio. The insurance companies didn't shed members by choice if they were making money off those customers. I am not trying to defend some of the salaries but managing businesses doing hundreds of millions of dollars of business in an industry as dynamic as healthcare does require some talent and that should command reasonable salaries. What we really need to talk about is the cost drivers for healthcare. Insurance is a mechanism to average those cost to keep them more affordable. In Oregon we have guaranteed healthcare coverage for individual and small group business. Sick or healthy they can be guaranteed coverage. The subsidies of those guarantees and the underpayment by our government for the Oregon Health Plan and Medicare all increase our costs. Even with all those disparities, the cost of services is too high for the average paying customer. It is estimated to be over 16% of our gross domestic product. Can we afford housing, food, gasoline, education and defense of our lifestyle and continue the expansion of our healthcare system? I think we need to re-invent the delivery of many health services. If insurance was not expected to pay for regular procedures consumers wold demand more cost-effective services and market forces would create active competition. Look at services for eye care and eye glasses. If we liken this to auto service it would be like having the extended warranty covering oil changes and wiper blades. We shouldn't expect that of our health insurance but that is the way health reform is going. We are being more insulated from the actual cost of services. Let us all become better consumers of healthcare and help bring efficiencies and market forces to this insulated industry.