Inside Bay Area (California)
Oakland-based Kaiser Permanente appears to be in good financial health, reporting that operating income rose sharply in the second quarter and predicting more moderate 2008 premium increases as a likely result.
“We believe the results of this quarter will allow us to moderate future rate increases,” said Tom Meier, corporate treasurer for the nonprofit health maintenance organization made up of Kaiser Foundation Health Plan Inc., Kaiser Foundation Hospitals and their subsidiaries.
Of the $877 million in second-quarter operating income, $356 million was “a positive anomaly” because of cuts in reserves for professional liability and workers’ compensation. “If you exclude this adjustment, operating income would have been $521 million,” Meier said.
This still compares favorably with the second quarter of 2006, when Kaiser reported operating income of $198 million.
Revenue rose around 10 percent to $9.4 billion.
In 2007, Kaiser premiums went up on average “mid-to-high single digits in percentages,” Meier said, though the amount varied widely between different groups such as Medicare, individual and commercial. The 2008 rate increases are still being determined, but will likely be smaller because of the good second-quarter results, he said.
Kaiser membership remained at 8.7 million members in the quarter.
A consumer advocate said the financial results show that Kaiser premiums are too high.
“They’re bringing in that money, and it’s not from new members, so the current members are overpaying,” said Jamie Court, president of the Foundation for Taxpayer and Consumer Rights. “This is an example of how overpriced Kaiser policies are in an unregulated market and why we need health insurance regulation.”
“We do invest very strongly in our organization and our members’ needs,” said Kathy Lancaster, Kaiser‘s chief financial officer, in response. “We spent over $600 million on capital investments in the second quarter, and we make $2.5 (billion) to $3 billion of capital investments annually.”
Because about 65 percent of Kaiser‘s business renews in the first quarter, the results from the first and second quarters are historically much higher than those in subsequent quarters, Lancaster said.