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Oakland Tribune

Kaiser's net income rises

Report follows rate increase averaging 11 percent

by Alec Rosenberg
May 09, 2003

Kaiser Permanente said Thursday that first-quarter net income rose 1 percent to $301 million -- a more-than-healthy figure, say critics who are pushing for a statewide bill to rein in health insurance rates.

Oakland's Kaiser Foundation Health Plan, Kaiser Foundation Hospitals and their subsidiaries said first-quarter operating income rose 7 percent to $308 million, as revenue rose 13 percent to $6.2 billion on higher premiums and a higher percentage of Medicare members.

"We are pleased that despite uncertainty and a weak economy, we are able to maintain our positive financial position," Kaiser Chief Financial Officer Robert Briggs said.

Kaiser, the nation's largest nonprofit health maintenance organization, raised rates an average of 11 percent each in 2003 and 2002, with higher hikes for Senior Advantage members.

Increasing HMO rates and profits led state Sen. Liz Figueroa, D-Fremont, last month to introduce SB 26, which would require HMOs and health insurers to get prior approval from the state before raising premiums, co-payments and deductibles. The bill is backed by the nonprofit Foundation for Taxpayer and Consumer Rights, the champion of Proposition 103, which put similar controls on California auto insurers.

California, which has 6.2 million uninsured people, needs SB 26 to help keep health insurance rates affordable, foundation spokesman Jerry Flanagan said.

"Both the percentage and numbers of uninsured are expected to increase unless we deal with the affordability issues," Flanagan said.

But insurers are lining up against SB 26. Kaiser said it opposes the bill.

Flanagan said that Kaiser, as a nonprofit, should support it.

"Anything else is an admission of guilt," Flanagan said. "HMOs that aren't charging gouging rates have nothing to fear from SB 26."

Health insurance rates have been rising across the board.

The average health care premium increase for U.S. employers was 12.7 percent in 2002 with double-digit hikes expected again in 2003, according to the Center for Studying Health System Change.

As a nonprofit, Kaiser invests net income back into the organization.

In 2002, Kaiser invested $1 billion in facilities, up $300 million from 2001.

It completed 11 medical offices in several states and has at least 14 medical offices under construction in California.

Also, Kaiser has begun the process to change to an automated medical records system.

"I remain convinced that this system will revolutionize the way we deliver health care to our members, improve the work environment of our physicians and employees, and keep us in the forefront of American health care," Kaiser Chief Executive George Halvorson said.

Kaiser has more than 8.3 million members. It employs 11,000 physicians and 134,000 technical, administrative and clerical employees.