By Kathy Robertson (Excerpt) Double-digit premium increases continue to pay off for the six HMOs that dominate the Sacramento market -- their combined net profits skyrocketed to more than $2.3 billion last year, up 605 percent from 2002.

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Revenue rose 11 percent. Profit margins ranged from a low of 2.1 percent at Health Net to a high of 5.2 percent at Blue Shield. And the hospital systems in the Sacramento region that these plans work with all have solid bottom lines of their own.

Meanwhile, employers are paying healthcare premiums this year that average 12 percent to 14 percent more than they paid in 2003. Many increases go far higher than that. The disparity makes some observers wonder why rates are rising so quickly if profits are strong.

"The market is completely oligopolized on both sides -- and it's imposing costs on everyone," said an analyst who knows some of the players and asked not to be identified. "If I hear one more bullshit comment about the aging population and consumers who demand too much, I'm going to go to the bathroom and throw up."

Both HMOs and hospitals counter that premiums will continue to climb because healthcare costs keep going up. The one bright light out there is that the trend seems to be slowing.

The slowdown won't spell relief this year, observers say, but could dampen hikes in 2005.

Premiums are set according to costs for the prior year and a best guess of what the risk and cost will be in the coming one.

"We did see, pretty much throughout 2003, an increase in medical cost inflation," said Dan Yarbrough, a spokesman at PacifiCare Health Systems Inc. of Santa Ana. "It's not declining, but the pace is slowing. What was 12 to 14 percent is now about 10 percent."

Furthermore, the HMO market is so saturated that there's not a lot of new business out there for health plans. This could mean more competition among plans for existing business -- good news for consumers if the plans lower prices to attract market share.

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Source: Sacramento Business Journal