Kaiser sees rise in net income; HMO says premiums could rise next year

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Alameda Times-Star (Alameda, CA)

OAKLAND, CA — Kaiser Permanente said Friday that second-quarter net income rose 90 percent to $306 million, led by higher premiums.

Oakland’s Kaiser Foundation Health Plan, Kaiser Foundation Hospitals and their subsidiaries said quarterly operating income rose 77 percent to $298 million.

Revenue rose 15 percent to $6.3 billion, from $5.5 billion a year earlier, while membership remained at 8.3 million, reflecting the weakened economy.

Kaiser raised rates an average of 11 percent each in 2003 and 2002, with higher hikes for Senior Advantage members.

Kaiser, the nation’s largest nonprofit health maintenance organization, expects rates to go up again next year as it faces rising health care costs and capital projects from building hospitals to automating medical records.

It’s too soon to say how much systemwide rates will go up in 2004, Kaiser spokeswoman Beverly Hayon said. The California Public Employees’ Retirement System said its Kaiser rates would increase about 18 percent next year, after raising HMO premiums 25 percent in 2003.

“Most people do look to CalPERS as a bellwether,” Hayon said. “Clearly, the rates are not going down — that’s one of the biggest issues everyone is facing.”

As a nonprofit, Kaiser invests its income into the organization, including $1.8 billion to create an automated medical record system with Epic Systems Corp. Kaiser expects to save $1 billion by scrapping its in-house efforts for Epic’s three-year project.

But critics say Kaiser rates are too high.

Kaiser‘s profits are being driven by record premium increases,” said Jerry Flanagan, spokesman for The Foundation for Taxpayer and Consumer Rights. “It’s the height of hypocrisy that Kaiser is a nonprofit but recording record revenue while premiums to consumers increase 20 to 30 percent.”

The foundation backs SB 26, which would require HMOs and health insurers to get prior approval from the state before raising rates. But the state Senate bill, which Kaiser opposes, has stalled.

As an alternative, the foundation is pursuing fund-raising so it can expand SB 26 into an initiative, possibly for the November 2004 ballot, Flanagan said.

For the first half of 2003, Kaiser net income rose 33 percent to $607 million, as revenue rose 14 percent to $12.5 billion on higher rates and one-time positive items.

“Our overall positive performance allows us to continue our investment in the new technologies which, we believe, will ultimately keep health care affordable for our members,” Chief Financial Officer Robert Briggs stated.

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