It's been theorized that the profitability squeeze that health plans endured after the boom years of the mid-1990s was self-inflicted; HMOs lusting after market share kept premiums artificially low without regard to the cost of providing care. Now, new statistics compiled by InterStudy Publications bear this out. The convergence of premium revenue with medical expenses had left the average health plan only 8 percent of revenue for administration by 1996. Since then, higher premiums have created only a little more breathing room.
SOURCE: HMO INDUSTRY REPORT 9.2, INTERSTUDY PUBLICATIONS, MINNEAPOLIS, 1999