Smaller HMOs reported on verge of bankruptcy
Smaller HMOs reported on verge of bankruptcy
Large managed care players reclaiming profitability
Ten of the nation’s HMOs could be close to failure due to continuing losses and capital deficits, says a November alert issued by Palm Beach Gardens, FL-based Weiss Ratings, a credit rating firm specializing in the managed care industry.
Meanwhile, the financial prospects of many larger HMOs (those with 100,000 or more members) continue to improve, boosted by recent strong earnings reports.
Even so, "with 10 plans at risk, plus 14 others that have already failed this year, I’d say we’re seeing an industry shake-out in the works," says Martin Weiss, chairman of Weiss Ratings.
Overall HMO premiums are up an average of 7% to 8% this year, compared with a 6% rise in medical costs, note analysts.
Industry analysts predict a 10% average gain in managed care organizations’ earnings for the third quarter, due mostly to higher premiums combined with reduced payments to providers. However, many insiders say the industry cannot maintain this pace.
"HMOs have been retaining those [premium] rate increases and not passing them on to provi ders,’’ who bear medical costs and may demand that HMOs pick up more of those expenses in the future, notes analyst Anne Anderson of Atlantis Research.
Under the heading of "the big get bigger," estimates peg third-quarter earnings of U.S. Healthcare at around 20%, and 14% for sister company CIGNA, both of which are owned by Hartford, CT-based Aetna.
Among the states with 10 or more HMOs reviewed by Weiss, Illinois companies were the most consistently profitable, with all 16 reporting profits during the period. Other states with a majority of profitable plans include Kentucky (9 of 11), California (20 of 26), and Colorado (12 of 17).
In contrast, 11 of North Carolina’s 17 HMOs lost money. Other states in which most HMOs lost money were Tennessee (12 of 19 lost money), Missouri (10 of 18), and Ohio (13 of 24).
In dollar terms, California’s 26 HMOs earned the most, with $168.5 million in profits, while Texas’ 51 plans lost the most, reporting a total of $9.9 million in losses.
Of the 470 HMOs reviewed overall, 21 received rating upgrades, while 42 were downgraded based on an analysis of first-quarter 1999 data.
Notable upgrades include:
• Metroplus Health Plan (NY) from E+ to D;
• Presbyterian Health Plan, Inc. (NM) from D+ to C-.
Notable downgrades include:
• Prudential Health Care Plan of California from B- to C+;
• Pilgrim Health Care, Inc. (MA) from C to D+;
• United Healthcare of NY, Inc. from B- to C+.
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