HMOs nearly double profits in 2003

The nation's health maintenance organizations nearly doubled their profits during 2003, according to Weiss Ratings, which said Blue Cross Blue Shield plans alone produced a 63 percent increase.

The financial ratings and analysis firm said HMOs overall earned $10.2 billion, an 86 percent increase over the $5.5 billion reported in 2002.

In analyzing HMOs' earnings, Weiss said it found one company, Kaiser Foundation Health Plan, reported a $1.1 billion increase in profit, or one-fifth of the industry's net profit improvement.

"The increase is a result of regulatory changes that required the company to consolidate its year-end financial statements for all entities owned, including hospitals and provider groups," Weiss Ratings said.

The company said HMOs reporting the largest year-over-year increases in earnings were:

• Oakland, Calif.-based Kaiser Foundation Health Plan, with a $995.5 million profit in 2003, up from a $117.5 million loss the year before.
• Detroit-based Blue Cross Blue Shield of Michigan, with a $374.4 million profit in 2003, up from a $161.3 million profit the year before.
• Seattle-based Group Health Cooperative, with a $187.8 million profit in 2003, up from a $6.9 million loss the year before.
• San Francisco-based Physicians Service, with a $314.2 million profit in 2003, up from a $142.6 million profit the year before.
• Tampa-based Aetna Health, with a $129.8 million profit in 2003, up from a $40.2 million loss the year before.

But more profit isn't necessarily good for the HMO industry's public relations.

"The industry's soaring profits continue to irk both consumers and businesses who are shouldering skyrocketing healthcare costs without any perceived improvement in benefits," said Melissa Gannon, Weiss Ratings vice president. "We may soon see the next wave of consumer backlash forcing HMOs to evolve their cost structures."

But feeling "blue" is good for at least part of the industry.

As a group, Weiss Ratings noted, the Blue Cross Blue Shield plans produced a $5.4 billion profit, a 63 percent increase from the $3.3 billion profit they recorded in 2002.

Of the 56 Blue plans, Weiss Ratings said 51 plans, or 91.1 percent, reported positive earnings in 2003.