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David Peel, Publisher and Editor, California Healthcare News

California Health Plans Maintain Profits Through First Six Months of 2013


By David Peel
Publisher and Editor
California Healthcare News

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Original Publish Date: November 5, 2013

California health plans recently filed financial reports for the first six months of 2013 and a significant majority were profitable. Of the fifty plans that filed reports to the California Department of Managed Health Care (DMHC), forty-three reported net income and only seven reported a net loss. This compares favorably to the thirty-five that reported net income and fifteen that reported a loss during the first six months of 2012. However, twenty-six of the fifty plans reported lower profits or a greater loss than the same period in 2012.

Tangible Net Equity (TNE) for the plans was generally greater at the end of the second quarter 2013 than the end of the second quarter 2012. TNE is defined by state statute and measures a plan’s solvency. It approximates net worth assuming intangible assets are removed and subordinated debt is added. TNE was higher for thirty-nine of the fifty plans at the end of the second quarter 2013 compared to the end of the second quarter 2012.

Our report (click here) shows Revenues, Medical Costs, Administrative Expenses, Net Income and TNE for fifty health plans that reported data to the DMHC for the first six months of 2013 and the first six months of 2012.

All information in this report was obtained from publicly available data on the DMHC web site. However, the DMHC web site doesn’t always incorporate post-close adjustments or audit adjustments. Accordingly, we asked representatives of all fifty health plans to review the DMHC figures and confirm they were correct. We made changes to our report if a plan provided corrected numbers.

Information not required to be filed with the DMHC (self-insured and parts of California insured business from non-domestic carriers) is not included in this report nor is it referenced in this article.

We prepared this report so a user could quickly determine the financial state of the health plan industry. Significant in-depth analysis of the numbers is beyond the scope of this article.

We asked plan representatives to comment on the figures and here is their feedback in alphabetical order by plan name.

AIDS Healthcare Foundation

Revenues soared from $195.6 million during the first six months of 2012 to $373.1 million during the first six months of 2013.

Staff Accountant Brandon Jong said, “The most significant change between the two periods came from our pharmacy division. Our pharmacy operations have been expanding by acquiring assets to increase our business operations. In 2013 we had pharmacy revenue of $302 million compared to the previous year total of $129 million. The pharmacy expense for the same period was $255 million compared to the previous year of $88 million. Offsetting this growth was significant 2013 cuts in Medicare and Medicaid programs.”

Blue Shield of CA

Financial results for the two six month periods were similar although administrative costs were 5.5% higher in 2013. Sean Barry of Blue Shield of CA said most of the increase in administrative costs was labor and IT related.

CalViva

CalViva experienced significant growth during the first six months of 2013 compared to the same 2012 period. All financial categories were favorable except for a $748 thousand reduction in net income. CFO Bill Gregor said, “Major changes from 2012 to 2013 are due to enrollment growth during the period. Also 2013 reflects reversal of AB97 cuts previously provided for which were reversed in 2013.”

Chinese Community Health Plan

All financial results for the first six months of 2013 showed improvement over the first six months of 2012. However, administrative expenses increased from $7.45 million to $8.32 million. CFO Amy Tsui said, “Administrative expense increased by 11.6%. This year we are working with our parent company Chinese Hospital and health education partner Chinese Community Health Resource Center creating health and quality improvement and education programs for our members. CCHP continues to build a strong financial position and is prepared to participate in the Health Exchange - Covered CA.”

Citizen’s Choice Health Plan

All financial results for the first six months of 2013 showed improvement over the same period in 2012 except for an unfavorable change in net income. Dora Pinones of Citizen’s Choice said, “Membership and full risk members increased substantially over 2012, an additional 2,000 members in 2013. Medical costs for the increased membership had a higher per capita cost in 2013. Administrative expenses increased due to an increase in legal costs and the relative actuarial cost associated with a service area expansion.”

Contra Costa Health Plan

Revenues increased from $172.7 million during the first six months of 2012 to $241.4 million during the first six months of 2013. Vicky Balladares, Community & Media Relations Specialist said , “Revenues increased over the prior period due to increases in Medi-Cal enrollment and capitation rates. Expenses increased in near proportion to the revenue increase.”

Health Plan of San Joaquin

All financial results for the first six months of 2013 showed improvement over the same 2012 period. CFO David Hurst said, “The favorable results stemmed from our entry in the Medi-Cal market in Stanislaus in January of this year.”

Concluding Comments

Our next report will focus on the nine months ending September 30, 2013 compared to the nine months ending September 30, 2012. David Peel is the Publisher of the California Healthcare News, a trade journal and web site of interest to California hospital, clinic, provider organization and health insurance professionals. He has served as the Chief Financial Officer of three west coast health insurance companies. He can be reached at 425-577-1334 or dpeel@healthcarenewssite.com.

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