Meeting of Health Insurers Honors Inefficiency & Waste

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Blue Cross not worthy of honor says FTCR

The California Association of Health Plans (CAHP), a trade organization representing health insurers, will honor Blue Shield of California today during a seminar titled, “Implementing Cost Management Programs Effectively,” even though the nonprofit Blue Shield is one of the most inefficient insurers in California, according to the Foundation for Taxpayer and Consumer Rights (FTCR).

“Praising Blue Shield for being ‘cost-effective’ while the company spends 17.4% of its revenue on overhead is like calling a Hummer ‘fuel-efficient’,” said Jerry Flanagan of the Foundation for Taxpayer and Consumer Rights (FTCR). “The fact that Blue Shield spends only 82.6% of our premium dollars on medical care means that California patients and business owners pay more for less health care.”

The state’s largest non-profit insurer, Oakland-based Kaiser Permanente, announced Thursday that the company’s net income increased 27% over the first quarter of 2004. FTCR said that even though non-profit insurers do not have to appease Wall Street investors with large profit returns, the companies still divert too much money to overhead costs. FTCR said that, like auto insurers, health insurers and HMOs should be required to justify premium increases and overhead costs before raising rates for enrollees.

–> According to the California Medical Association‘s (CMA) annual report*, in 2002-2003 Blue Shield diverted 17.4% of its revenue to administration, overhead and income. Of that, 13.5% went to administration and overhead. In comparison, government run programs like Medicare have administrative and overhead costs of approximately 4%.

–> In CMA‘s statewide comparison, only two other health insurers, UHP Healthcare and CIGNA HealthCare of California, spent more on administrative costs than Blue Shield.

The CAHP meeting is being held at the Hyatt Regency San Francisco Airport Hotel in Burlingame from 8:30 am. to 2 pm. today.

FTCR is conducting televised health care town halls throughout the state with patients, business owners, doctors, nurses and hospital executives. The goal of these convenings is to find solutions for affordable health available to all Californians. A consensus theme from these events is the need to rid the health care system of waste and inefficiency.

* California Medical Association, “11th Annual Knox-Keene Health Plan Expenditures, FY 2002-2003” available at:


Consumer Watchdog
Consumer Watchdog
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