California's big health insurers profited in 2010, data show

California’s largest health insurance companies enjoyed a profitable year in 2010 even as they complained about shouldering rising costs for hospital care, doctors’ services and prescription drugs, new data show.

The state’s insurers and health plans collected $105 billion in revenue last year, and the largest insurers posted profits after paying medical claims for their policyholders, according to the California HealthCare Foundation’s annual Health Care Almanac.

For example, the state’s largest for-profit insurer, Anthem Blue Cross, posted a 4.2% profit margin, earning $206 million, in 2010 on preferred provider organization policies regulated by the California  Department of Insurance.

The Woodland Hills company also enjoyed 3.7% profit margin, earning $414 million, for HMO business overseen by a second regulator, the Department of Managed Health Care.

To learn more about revenue, profit and other data on California's insurers, go to http://www.chcf.org/publications/2011/11/california-health-plans-insurers.

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-- Duke Helfand

Photo: A patient visits a doctor. Credit: Jay L. Clendenin / Los Angeles Times

Proposed health insurance rate regulation initiative submitted

The consumer group that brought regulation of auto insurance rates to California now wants to do the same for healthcare coverage.

On Wednesday, the Santa Monica advocacy group Consumer Watchdog submitted to the state attorney general's office a proposed initiative that would require insurance companies, health maintenance organizations and preferred-provider organizations to get prior approvals from the California Department of Insurance for proposed rate hikes.

The petition, once cleared for circulation, would need about 505,000 signatures from registered voters to appear on the statewide ballot in November 2012. The initiative, if it qualifies for the ballot, is expected to garner fierce opposition from insurance and related healthcare providers. Backers said they are prepared to fight a one-sided campaign with an industry that could easily spend $100 million.

The health insurance measure would be an update of Proposition 103, an initiative approved by California voters in 1988 that made auto and homeowner insurance the most highly regulated in the nation.

"This applies rate regulation, prior approval (of rates), transparency provisions and refund authority to health insurance," said Jamie Court, president of Consumer Watchdog.

Also under the draft initiative, health insurance executives could be prosecuted for perjury if they provide untruthful information about the need for higher rates for individual and small-group health insurance coverage.

"It's a big hammer to make sure that if rates have to go up, the information is solid," Court said.

The Consumer Watchdog initiative is similar to bills in the state Legislature that have failed to win passage in the last five years.

State Insurance Commissioner Dave Jones authored one of them as a member of the state Assembly two years ago and supported another version that stalled this year.

Jones continues to support the concept of regulating health insurance rates, a spokesman said. But he is still reviewing the Consumer Watchdog ballot initiative.

Representatives of the health insurance industry called the proposed initiative "seriously flawed." It also faces opposition from employers, health plans, doctors hospitals and medical groups.

"If this proposal even makes the ballot, it will be defeated," said Charles Bacchi, executive vice president of the California Assn. of Health Plans.

 

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Photo: Emergency room personnel at UC Davis Medical Center in Sacramento. Credit: Rich Pedroncelli /Associated Press

Dr. Wal-Mart: May offer more primary healthcare, seeks partners [UPDATED]

It’s not enough to be a clothing store, grocer, pharmacy, auto servicer and more. It looks as if Wal-Mart Stores Inc. now plans to play doctor too.

The largest retailer in the country recently sent out a request for information to potential partners to help it offer a range of medical services without the traditionally steep prices.

In the 14-page document, Wal-Mart said that it “intends to build a national, integrated, low-cost primary care healthcare platform that will provide preventative and chronic care services … in an affordable and accessible way.”

Among the areas Wal-Mart is exploring: HIV management, obesity and arthritis monitoring, depression care, pregnancy and STD testing, drug screening, physical exams and even stress and sleep help.

Wal-Mart said it would select partner vendors for clinical care, diagnostic and preventative services, health and wellness products and more by mid-January.

[Update 2:30 p.m.: After the document went public, Wal-Mart released a statement distancing itself from the proposal.

“The RFI statement of intent is overwritten and incorrect," said Dr. John Agwunobi, president of Walmart U.S. Health & Wellness. "We are not building a national, integrated, low-cost primary care health care platform.”]

All this not long after Wal-Mart said that it would no longer give new part-time employees health insurance benefits.

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Photo credit: J.D. Pooley / Getty Images

Amgen to buy back $5 billion in shares

Thousand Oaks biotech giant Amgen Inc. said it will buy back up to $5 billion of its common stock, causing its share price to jump in morning trading.

The drug maker said it would purchase the shares for between $54 and $60 each in a buyback program known as a modified Dutch auction tender offer. Using the model, shareholders will say how many shares they want to tender and the amount within Amgen’s range they’re willing to accept. 

The company then will set a price, paying the same amount for all shares.

The auction will start Tuesday and end Dec. 7. Amgen also said it would issue new debt to fund the tender offer and “for general corporate purposes.”

"Our strong balance sheet and cash flow enable us to complete this transaction in an attractive interest rate environment while also preserving the flexibility to further accelerate the growth of our business through focused, strategic acquisitions," Chief Executive Kevin W. Sharer said in a statement.

The announcement, part of Amgen’s previously announced $10-billion buyback program, sent the company’s stock up to $58.35 early Monday before it slipped back to $57.60 at midday. The stock closed Friday at $55.17.

But credit rating agencies Moody’s Investor Service and Fitch Ratings both downgraded the company’s debt. Moody’s pushed down the rating to Baa1 from A3, while Fitch lowered its rating to BBB from A-. The new ratings still are considered investment grade.

Standard & Poor’s maintained its rating of Amgen at A+.

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Photo: Paul Sakuma / Associated Press

Hospital group sues over cuts to Medi-Cal program

 
The trade group for California’s hospitals has sued state and federal officials to block a 10% cut in government reimbursements for healthcare providers who treat low-income patients.

The California Hospital Assn. said in its suit, filed in federal district court in Los Angeles, that cuts to the Medi-Cal insurance program will threaten the ability of many hospitals to continue operating skilled nursing facilities.

Patients, particularly those in rural communities and other medically underserved areas, will likely face delays or gaps in healthcare services, the lawsuit contends.

Other medical providers also have warned that cuts to the program, which is funded by state and federal governments, would deprive low-income patients of access to care. Among those targeted for the cuts are physicians, pharmacists and optometrists.

“The filing of this lawsuit is a regrettable but necessary step to protect access to care for California’s most vulnerable patients,” hospital association President C. Duane Dauner said in a statement. “California’s hospitals cannot stand by and allow these cuts to take effect.”

The 10% cuts, part of the 2011-2012 budget deal signed by Gov. Jerry Brown, are retroactive to June 1. They required federal approval, which the Obama administration gave last week.

Officials in Sacramento and Washington said they could not comment on the lawsuit but added that they would closely monitor the effect of the reduced payments to ensure that patient care is not jeopardized.

Norman Williams, a spokesman for the California Department of Health Care Services, said reductions can be “applied while still maintaining sufficient access for Medi-Cal beneficiaries.”

Williams’ boss, department director Toby Douglas, is named in the lawsuit, as is federal Health and Human Services Secretary Kathleen Sebelius.

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Consumer Confidential: Medicare rates, peanut butter prices

Here's your I'll-take-you-there Tuesday roundup of consumer news from around the Web:

-- Good news for seniors: Premiums for Medicare Part B coverage for physician and outpatient services will increase less than projected next year. Also, the deductible will actually decrease. Premiums will go up $3.50, to $99.90 per month for 2012. The Medicare Trustees report had previously projected an increase of $10.20, to $106.60 for 2012. Premiums have not increased for retirees since 2009. The premium for new retirees in 2011 was $115.40; this group of retirees will now pay the standard premium of $99.90 per month, for a reduction of $15.50 in their monthly premium. And the Medicare Part B deductible decreased by $22, from $162 last year to $140 for 2012.

-- Your PB&J is about to get pricier. Sharp increases in peanut butter prices have begun going into effect after one of the worst peanut harvests in decades. Kraft is raising prices for its Planters brand peanut butter by 40%, while ConAgra has instituted increases of more than 20% for its Peter Pan brand. J.M. Smucker, which makes Jif, is introducing price hikes of about 30%. Consumers, meanwhile, are already seeing these increases reflected at grocery stores. Americans spend almost $800 million on peanut butter and consume an average of more than 6 pounds of peanut products each year, according to the National Peanut Board, a farmer-funded research group.

-- David Lazarus

Photo: Medicare rates won't go up as much as expected. Credit: Ricardo DeAratanha / Los Angeles Times

 

Lap-Band sales fell 16% in third quarter, Allergan says

Sales of Allergan Inc.’s Lap-Band weight-loss device dropped 16% in the third quarter of the year, the company said.

The Lap-Band is familiar to many Southern California residents because it is marketed extensively by a company called 1-800-GET-THIN on freeway billboards, television, radio and the Internet. The ad company is not affiliated with Allergan.

In a Wednesday conference call with analysts, Allergan Chief Executive David E.I. Pyott blamed the slump in Lap-Band sales on the sluggish economy, high unemployment and steep insurance co-payment requirements. In a statement, the company said it “remains committed to the Lap-Band business, as we strongly believe it represents an important tool in addressing the obesity epidemic.”

Since 2009, five Southern California patients have died after undergoing Lap-Band procedures at clinics affiliated with the 1-800-GET-THIN ads, according to lawsuits, coroner’s records and interviews.

Several lawsuits have been filed against the advertising company, clinics at which the surgeries were performed and the doctors involved in the surgeries. Through their attorneys, the marketing company and surgery centers have denied wrongdoing.

The Lap-Band represents just a small fraction of Allergan’s sales. The Irvine company also markets Botox wrinkle treatment, breast implants, an eyelash lengthening drug and a number of eye medications. Allergan reported $1.31 billion in sales for the third quarter, down slightly from the $1.33 billion that analysts had expected. Its shares fell $3.22, or 3.7%, to $83.74 on Wednesday.

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Photo: An advertisement for Lap-Band surgery. Credit: Mariah Tauger / Los Angeles Times

WellPoint profit drops even as revenue grows

Health insurance giant WellPoint Inc.’s profit dropped 7.6% in the third quarter compared with the same period last year even though enrollments and revenues rose.

The nation’s largest insurer by membership and parent of Anthem Blue Cross in California earned $683.2 million in the three months that ended Sept. 30, down from $739.1 million in the year-earlier period.

Executives at the Indianapolis company said profit was down partly because of lower investment income and higher expenses from the purchase of CareMore Health Group, a Cerritos healthcare provider that serves seniors. The company also said last year’s performance was aided by the release then of $110 million in reserves for operating expenses.

Despite smaller profit, earnings per share rose 3% in the third quarter to $1.90, up from $1.84 during the same period last year, primarily because the company bought back 13.4 million shares.

“Our ability to add new customers while controlling costs demonstrates our execution and emphasis on creating a more affordable operating model for our customers,” Chief Executive Angela F. Braly said in a statement.

WellPoint, which operates Blue Cross Blue Shield plans in 14 states, said enrollment in the third quarter grew 2.6% to 34.4 million, up from 33.5 million during the same period last year. The company has added more than 1 million new members since the beginning of the year.

Enrollment in its senior business grew faster, up 14.8% to 1.44 million policyholders from 1.26 million last year, aided by the company’s acquisition of CareMore.

Third quarter revenue rose 5.7% to $15.4 billion, up from $14.6 billion at the same time last year.

WellPoint raised its 2011 earnings forecast, saying it will be $6.90 to $7 per share, not counting investment gains. Previous guidance was $6.75 to $6.95 per share.

WellPoint shares were up $2.58, or 3.9%, to $69.58 on Wednesday.

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Photo: WellPoint headquarters in Indianapolis. Credit: Darron Cummings / Associated Press

Medical school enrollment on the rise

    

For those worried about the shortage of doctors in the U.S. healthcare system, here is a bit of good news: The number of students enrolling in medical schools has reached its highest level in more than a decade.

More than 19,200 people entered their first year of medical school this year, a 3% increase over 2010, according to new data from the nonprofit Assn. of American Medical Colleges.

The number of new medical students has been growing steadily since 2001, when medical schools reported 16,365 first-year students.

Medical schools also are attracting more applicants. The association said 43,919 students applied for admission this year, the largest number in a decade.

The figures show that medicine remains an attractive choice for college graduates in search of fulfilling careers, according to Dr. Darrell G. Kirch, the association’s president.

The potential for large paychecks is not a significant driver of the growing enrollment, Kirch said, noting that medical students can expect to accumulate an estimated $161,000 in debt on average by the time they finish school.

"Today’s college undergrads are very service-oriented," he said. "They are drawn to medicine because they like the notion of meaningful work."

The numbers of applicants and new students from most major racial and ethnic groups increased in 2011, although some of the gains were modest, the association said.

For example, 1,375 African Americans enrolled for the first year of medical school this year, up from 1,350 in 2010. Similarly, 1,633 Latino students entered medical school in 2011, up from 1,539 in 2010.

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Photo: Dr. Arturo Pelayo talks with patient Juvanna Fleming at Saint Francis Medical Center in Lynwood. Credit: Francine Orr / Los Angeles Times

 

Consumer Confidential: Wal-Mart cuts benefits, Starbucks goes 'Blonde'

Here's your fly-like-an-eagle Friday roundup of consumer news from around the Web:

--The nation's largest employer will provide fewer health benefits to some employees. Wal-Mart will no longer offer health insurance to new part-time employees who work fewer than 24 hours a week and will charge workers who use tobacco more for coverage as healthcare costs rise. The company is also slashing the amount it puts in employees' healthcare expense accounts by 50%. Wal-Mart isn't alone in looking for ways to cut spending on healthcare. Starting next year, Wells Fargo will ask employees to fund their own medical expense accounts or choose to pay higher insurance premiums and have the company fund them, following the lead of companies such as General Electric that offer account-based healthcare plans. A study last month by the Kaiser Family Foundation found that the average annual premium for family coverage through an employer increased 9% to $15,073 this year.

--Do "Blondes" have more fun? Starbucks hopes so. The company is launching a decidedly non-European new Blonde roast. It will launch in both Starbucks outlets and supermarket aisles in January. Speaking at a Chicago press conference, Annie Young-Scrivner, Starbucks' chief marketing officer, said 40% of the 130 million coffee drinkers in the U.S. prefer a lighter-roast coffee. The new blend is aimed at them, as well as at the millions of one-time customers who had their first cup of Starbucks and announced it tasted like rocket fuel. Starbucks Blonde will come in two varieties: Veranda and Willow. You know, classic coffee flavors.

-- David Lazarus

Photo: Wal-Mart is cutting health coverage for some workers. Credit: Paul Sakuma / Associated Press

 

Wal-Mart cuts health coverage for part-timers, raises premiums

Wal-Mart’s 1.4 million workers are about to see much less health coverage -– or pay much more for it -– than they’re used to.

The nation’s largest private employer is heavily scaling back its insurance plans for part-time workers while hiking up the premiums for full-time staff, according to the New York Times.

Bentonville, Ark., pointed to the ever-rising cost of healthcare, not the health reform law, as the motivation behind its policy changes this week.

The company’s health insurance plans will be off-limits to all future part-time employees who work less than 24 hours a week. Workers averaging 24 to 33 hours a week will no longer be able to add a spouse onto the coverage, though children are still eligible.

Wal-Mart had originally offered benefits to its part-time staff after they worked a year at the company.

In 2012, full-time employees will see premiums rise as much as 40%, according to The Times. Smokers will have to shell out up to $90 more during each pay period.

All this after Wal-Mart added its name to a letter sent to the president in 2009 urging healthcare reform, arguing that “healthcare costs more because we don’t cover everyone,” and adding that “a large and growing uninsured population also cripples our broader economic growth.”

Average annual premiums for family health benefits are up 9% in 2011 to more than $15,000 on average -– an increase that outpaces the 2.1% jump in workers' wages and the 3.2% rise in general inflation, according to a Kaiser Family Foundation report last month.

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Photo credit: Walmart.com