HMO'S: So how much does an HMO spend per dollar of premium per person? Well, California recently did a study of the 15 largest HMO's in the state and showed a considerable variance- and it probably is one of the best ways to ever find the HMO you want to use.

On average, they spent 82.5 cents of each health care dollar on medical in 1996. Kaiser spent as high as 96.5% on medical care but California Care Health Plans spend only 74.3%. Here is a table of the 15.

# of Enrollees Spent on Medical


Administration Profit
Kaiser 4,874,500 96.5% 3.0% 0.5%
Prudential 750,000 87.4 17.8 -5.3
CIGNA 705,000 86.0 14.2 -0.2
FHP 902,000 83.8 11.5 4.7
PacifiCare 1,200,000 83.6 10.7 5.7
Omni 127,000 83.5 16.2 0.4
Blue Shield 304,000 82.4 18.7 -1.1
Universal 105,000 81.7 15.4 2.9


198,888 81.9 17.4 0.7
Aetna 397,000 81.4 12.5 6.1
Health Net 1,367,000 80.1 11.6 8.3
Lifeguard 158,000 80.1 11.6 8.3
Maxicare 140,000 79.5 10.4 10.1
Foundation 602,000 77.4 16.9 5.8


2,150,000 74.3 15.2 10.5

This table is not perfect, but after just a simple review, couldn't you tell me which one(s) you would use??

HEALTH CARE (WSJ) Type of plan by all employees with health benefits.

1993 1997

Traditional fee for service 48% 15%

Preferred Provider Organization (least restrictive) 27 35

Point of Service (moderately restrictive) 7 20

Health Maintenance Organization (most restrictive) 19 30

Due to the change over to HMO's, the medical cost of living was only 0.2% in 1997 for both active and retired employees.

Average cost for employer in 1996- $3,915/employee

In 1997- $3,924.

HMO'S: 1998 There is a considerable backlash against almost all HMO's for supposedly not delivering the medical service the consumer demands. Some of this is justifiably deserved- but much is not. People fail to recognize that a lot of care by physicians under the standard fee for service has been substandard- it's just that the press finds a bigger target in exposing some problems with HMO's. Nonetheless, HMO's are under a greater and greater squeeze in trying to provide more and more under a limited budget. In past years as the industry grew leaps and bounds, profits were significant and competition limited. Much has changed. Consumers want more access to outside physicians and many facilities have offered point of service programs where members- for a higher cost- can use other physicians than under the HMO umbrella. In fact the POS has tripled in popularity during the past decade and covered over 26 million people in employer sponsored health care in 1992- up from 8 million in 1992. There are now about 37 million covered under HMO's- about 40% higher than in 1992.

Many HMO's expanded into the Medicare market- again doing quite well financially as they initially brought in some of the more healthy- and less costly- patients. However, the states subsequently reduced the payments under Medicaid to the HMO's and care for the very poor- identified in previous articles- has become unprofitable. Medicare managed care programs now cover about 11 million poor, 4 times than just four years ago. Even under Medicare, the payments are going down. Until most recently, the federal government payments to HMO's for the elderly had been rising at 10.5% annually. But last year congress reduced such increases to just 2%. Some HMO's have dropped out and others are concerned whether they can stay profitable in the marketplace. In fact, Kaiser just raised their rates 12+%.