Insurers post robust profits for the second quarter

Almost all major health insurance companies have reported balance sheets brimming with black ink.

By Robert Kazel, AMNews staff. Aug. 25, 2003.

Springtime brought a bumper crop of profits for most of the nation's large, investor-owned HMOs, and several even reported record-breaking financial results for the second quarter.

Just about all of the leading health care payers met or surpassed their stated profit goals by raising premiums, redesigning products to shift costs to patients and cutting overhead. All insurers also benefited from an apparent decrease in medical cost acceleration.

The largest profit gain was reported by Cypress, Calif.-based PacifiCare Health Systems Inc., which had net income of $73 million in the second quarter, ending June 30, a 260% increase compared with profits of $20.3 million a year earlier. This profit was accompanied by a drop in total medical membership to 2.9 million, down from 3.3 million. The company attributed its jump in profits to "disciplined pricing" of insurance policies, an improvement in its medical loss ratio -- to 83.8% from 87.5% a year before -- and slowing medical inflation.

The numbers seemed to bolster the company's assertion that it was on a clear course of recovery after having posted a net loss of $839 million for the last half of 2002. PacifiCare's revenues remained roughly flat for the second quarter of 2003 compared with a year earlier, about $2.7 billion.

Indianapolis-based Anthem Inc. reported a net income of $177 million for the second quarter, up nearly 67% compared with the second quarter of 2002. Revenues for Anthem were $4.1 billion, nearly double the $2.8 billion reported a year earlier.