Consumer Advocates Renew Call for Cutting Health Insurer Fat;

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Blue Cross of California Profits Increase 43% in 2004

Santa Monica, CA — Consumer advocates said today that California should set a national example by regulating health insurance overhead costs as insurance company profits continue to see double digit increases. The Foundation for Taxpayer and Consumer Rights (FTCR) cited data released today showing that HMO profits increased 10.7% in 2004 after an 80% increase in 2003, a trend that will likely continue as HMO mergers reduce market competition and patient choice.

The recently merged Blue Cross of California, which joined with Anthem to form the nation’s largest insurer, WellPoint, experienced a 43% profit increase in 2004. In July, UnitedHealth announced plans to purchase PacifiCare to become the nation’s second largest health insurer.

“Including profits, CEO salaries and administration costs, more than 25% of every health care dollar we spend goes to HMO overhead. As a result, patients and small business owners pay more for less care. The last decade of HMO mergers has taught us that when fewer HMOs dominate the health care market, quality goes down, premiums go up, and patients get short changed,” said Jerry Flanagan of the Foundation for Taxpayer and Consumer Rights. “Health care should no longer be treated like a second-class citizen. California drivers have saved over $23 billion dollars as a result of voter approved Prop 103 which requires insurers to justify overhead costs before raising rates. Rules that govern auto and home insurance must be applied to health care. Without oversight, more and more California families will no longer be able to afford their health insurance.”

Currently, five companies control over 80% of California’s HMO market.

According to Weiss:

Due to industry consolidation, consumers are increasingly enrolled in larger insurers; insurers with membership exceeding 500,000 have captured 59 percent of the market compared to 46 percent five years ago. Currently, only one quarter, 24 percent, of consumers are enrolled in health plans that cover fewer then 250,000 members compared to 35 percent in 2000.”

FTCR recently launched an Internet campaign giving consumers a chance to fight back against outrageous CEO salaries and to call on regulators to crack down on profiteering by regulating health insurance premiums in the same manner as auto and home insurance premiums under Prop 103. To view the animation and on-line petition go to:

Weiss Ratings Inc., an independent financial services company, released an analysis today of 515 managed care organization. The analysis is available at:

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The Foundation for Taxpayer and Consumer Rights (FTCR) is California’s leading nonpartisan consumer advocacy organization.

Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

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