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New Review Finds California Commercial Health Plans' Profit Margins Rank Among The Lowest In The Health Care Sector

SACRAMENTO, Calif., Feb. 14, 2013 /PRNewswire/ -- A new review of public data finds the average net profit margin for California's commercial managed care health plans was 3.6 percent in 2011, far less than the national averages for a host of medical-related industries, Patrick Johnston, president and CEO of the California Association of Health Plans (CAHP), announced today.

Other sectors of health care benefitted from net profit margins of up to 16.7 percent, according to Yahoo Finance data. In comparison, a new review of data filed with the state by California's commercial managed care health plans found they spent 89 cents out of every $1 in revenue on medical care for their members in 2011, the latest year for which figures are available.

"Some people and organizations have misled the public about insurers' profits, so we compiled accurate information that shows the lion's share of premiums goes to medical care — rather than profits," said Johnston. "The truth is California's health plans have a very small average net profit margin, especially when compared to profits of up to 16.7 percent for others in the health care industry."

The Affordable Care Act and state legislation also place tight limits on profits by requiring health plans to spend 85 cents out of every premium dollar on health care. This is called the "medical loss ratio." If health plans don't meet these requirements, they must provide rebates to policyholders.

To determine net profit margins, CAHP reviewed the latest and most comprehensive public filings at the California Department of Managed Health Care for the state's commercial managed care health plans. It found these plans, on average, surpassed the medical loss ratio requirements by spending 89 percent of revenues on medical care in 2011 and that they had a 3.6 percent average net profit margin.

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