For Release: June 14, 2006 Contact: Maureen Cetrino
455-2225
Breslin Study Finds HMO Profits and Premiums Soaring
Fewer Covered, Health Providers Paid Less
Senator Neil Breslin (D-Albany) today released a report documenting
the soaring profits of New York's health maintenance organizations
(HMOs) -- profits that nearly doubled over a five year period.
The study shows HMO profits increased 93 percent from 2001 to 2005,
from $672 million in 2001 to a record $1.3 billion last year. During
that five year period, HMOs in New York recorded total profits of more
than $5 billion.
"While the oil industry garners all the headlines, HMOs in New York
reported massive profits, much of which has come at the expense of
working people, small business owners, and state and local taxpayers,"
Breslin said.
Ever since 1999, HMOs have been permitted to charge whatever premiums
they choose, without the approval of the State Insurance Department
and with no requirement that rate increases be justified. Breslin has
sponsored a measure that would require public hearings before any rate
increase of more than five percent is allowed. The measure – which has
consistently passed the Assembly – has never been allowed to the
Senate floor for a vote, despite the fact that it is now sponsored by
Republican Senator Michael Balboni (S.2712).
Breslin's report found premiums collected by HMOs in the past five
years jumped 20 percent, from $14.5 billion to $17.4 billion.
However, this growth in premiums outpaced increases in medical
payments by more than $1 billion, fueling the surge in profits.
"Clearly, HMOs have gotten away with boosting premiums far beyond what
was necessary to meet medical costs," Breslin charged.
Remarkably, skyrocketing profits have come even as HMOs lost 14
percent of their customers, many of them undoubtedly priced out of the
market. "What other business can lose one of every seven customers,
and still manage to double their profits?" Breslin asked.
Those lost customers forced to drop their coverage present a larger
problem, especially for New York taxpayers. "Every time another
person becomes uninsured, and has to rely on the emergency room for
his or her health care, it adds to the burden of hospitals and,
ultimately, taxpayers," Breslin said.
The report also found that despite steady premium increases, the
percentage of those premiums paid out to providers has fallen
consistently, from 85.3 cents on the dollar in 2001 to just 81.7 cents
last year.
"This means HMOs are increasing their take, while reducing the share
paid to doctors, hospitals and pharmacies," Breslin said. "HMO
executives are getting rich, while those who actually provide health
care are getting less."
In addition, HMOs spent $2 billion last year to "administer" and
"adjust" claims. This is roughly 14 percent of what they paid
providers -- which is almost four times what the Federal government
spends to administer the Medicare program.
That figure also represents a 24 percent increase for HMOs
administrative costs. "Why did it cost New York's HMOs 24 percent more
money to serve 14 percent fewer customers?" Breslin asked.
Breslin said he was planning to hold a series of public hearings
across New York State to gather input from small business, local
governments, labor, hospitals, health care providers, and consumers.
"While the Governor and the Senate Majority have largely ignored this
problem, my Democratic colleagues and I are committed to a thorough
examination of this industry, and we will prescribe a cure for the
insurance ills that plague New Yorkers," Breslin promised.
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