• Government
• Profession
• Business
• Opinion
• Health

• Health reform
• H1N1
• P4P
• EMRs
• Medicare
• Liability
• AMA House
• » More

• Book Excerpt
• Business Pitch
• Meetings
• » More

• Contract Language
• Ethics Forum
• In the Courts
• Practice Management
• Technically Speaking
• » More

• Issue dates
• Regions
• Health plans
• Sections
• News briefs
• Columns
• Editorials
• Letters
• Writers
• Other years

• Search tips
• E-mail alert
• Radio
• RSS
• Mobile
• Subscribe
• Institutions
• Staff directory
• Advertising
• Permissions
• Reprints
• News media
• Site guide
• Useful links
• About
• Premium
• Contact

Managed care profits up, optimism for 2005 strong

But doctors say plans, despite their bounty, are still squeezing them by suppressing reimbursements and squeezing patients by rapidly raising premiums.

By Robert Kazel, amednews staff. Feb. 28, 2005.

• PRINT|
• E-MAIL|
• RESPOND|
• REPRINTS|
• SHARE

To Douglas K. Holmes, MD, hearing that most of the biggest managed care plans posted hefty profit increases last year is something like watching the old TV show "Lifestyles of the Rich and Famous" -- a story of wealth, success and goals achieved that appears to have little to do with his own daily life.

"Despite the wonderful profits they've made, they are still very hard-line when we're trying to negotiate a contract with them," said the Raleigh, N.C., otolaryngologist, who in contract negotiations three months ago was offered reimbursement increases of no more than 5%. "There is no transference of any of their [additional profits] to doctors' rates."

This is an old story to Dr. Holmes, but the profit levels of most large insurers are surging with an exuberance that's catching the attention of Wall Street anew. Six of the seven largest health plans saw their profits increase in 2004 -- California-based Health Net was the only one to see a decline. Aetna and CIGNA saw their profits more than double. Aetna's were up 136% and CIGNA's were up 128%.

Managed care "had a great year," said Carl Mercurio, president of Corporate Research Group, a New Rochelle, N.Y.-based consulting firm that studies the industry. "Profit was way up, they were able to increase [premiums], they kept medical costs in line, and they've enjoyed some efficiencies in administration."

HMO premiums increased by about 10% to 12% last year on average, about two to three times the rate of inflation, Mercurio said. At the same time, medical cost increases fell from 7.8% to 6.4% last year, said Isabelle Roman-Barrio, a senior financial analyst at New Jersey-based A.M. Best Co.