FOR-PROFIT HMOs: Are the Glory Days Gone?
As the HMO industry's first quarter financial results begin to roll in a report from the Kaiser Family Foundation examines the growing influence of publicly traded, for-profit health insurers in the past two decades. Between 1981 and 1998, "for-profit HMOs grew from representing 12% to 63% of total HMO enrollees, and from 18% to 74% of plans," with the growth fueled both by emergence and growth of existing companies and widespread conversions of not-for-profit plans. Between 1987 and 1997, the market capitalization of the HMO industry skyrocketed from $3 billion to nearly $39 billion, an almost 12-fold increase. Over that same period, the overall stock market grew slightly more than four-fold. However, HMOs' streak of outperforming the market has largely come to a halt in recent years, as losses between 1994 through 1997 ended six years of steady gains. The report concludes: With "over three-quarters of those with employment-based health insurance ... enrolled in some type of managed care plan," prospects for further growth is limited; "[r]ising premiums can only increase the already large number of people uninsured"; and it "is not clear whether profit status matters in the quality of care that is delivered, or whether, in the near future, we will have reliable measures to judge quality across not-for-profit and for-profit organizations" (report, 3/99).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.