Health Plan of the Redwoods Liquidation Plan Prompts DMHC To Review Health Plan Financial Reserve Requirements
The Department of Managed Health Care has launched an investigation into the financial standards required for state HMOs and medical groups in response to Health Plan of the Redwoods' decision last week to liquidate and shut down by Oct. 31, the Santa Rosa Press Democrat reports. State regulators have raised concerns over whether the state has adequate financial reserve requirements for HMOs and medical groups that function as insurance companies (Fricker, Santa Rosa Press Democrat, 8/3). Faced with an $8 million budget deficit since Jan. 1, HPR filed for federal Chapter 11 bankruptcy protection on May 31. HPR officials estimate that the health plan owes $38.7 million to creditors, which include local hospitals, physicians and other health care professionals (California Healthline, 8/1). The "urgency" of the state investigation "is due the fact that HPR's bankruptcy is the latest in quick succession of managed care crises statewide," the Press Democrat reports. State regulations differ for HMOs, medical groups and traditional health insurance companies. Under state law, insurance companies, which "promise to pay" for health care, must have 50% to 100% more in their reserves than HMOs, which "promise to deliver care." However, analysts do not expect the state to take "immediate action because any change in reserve requirements is controversial," the Press-Democrat reports. For example, an increase in reserve requirements would "make it even harder" for smaller HMOs to survive financially. "We want more security, which is why we're looking at more reserve requirements," DMHC spokesperson Steven Fisher said (Santa Rosa Press Democrat, 8/3).
In response to HPR's liquidation plan, the Press Democrat ran a series of articles to address the issue. A summary of the articles appears below.
- "Kaiser Gears up to Handle Influx": The article reports that Kaiser Permanente will hire 20 doctors and establish additional office space in response to an expected increase in demand as HPR's 78,000 members in Sonoma County lose coverage (Norberg, Santa Rosa Press Democrat, 8/2).
- "Liquidation Could Be a $20 Million Blow": The article reports that physicians owed payments by HPR will "be lucky to get 50 cents on the dollar," and area providers will likely lose about $20 million as a result of HPR's liquidation (Fricker, Santa Rosa Press Democrat, 8/2).
- "HPR Formed as Way To Offer Local Managed Care": The article examines the history of HPR, a 22-year-old health plan developed by area doctors to offer prices competitive with Kaiser Permanente (Fricker, Santa Rose Press Democrat, 8/2).
- "Employers Scramble for HPR Alternatives": The article reports that many employers in Sonoma County have secured contracts with other health plans to prepare for the shut down of HPR (Norberg, Santa Rosa Press Democrat, 8/2).
- "State Law Assures HPR Members of New Coverage": The article examines state health care regulations and reports that state regulators will ensure that HPR members find health coverage through one of the five insurance companies that operate in Sonoma County (Fricker, Santa Rosa Press Democrat, 8/2).
- "Members Resigned to Higher Premiums": The article profiles HPR members and reports that many will pay more in premiums and copayments when they switch to other health plans (Wolfe, Santa Rosa Press Democrat, 8/2).
- "Patients' Questions Answered": The article provides a list of consumer questions and answers related to HPR's liquidation (Allday, Santa Rosa Press Democrat, 8/2).
- "So Long, HPR": According to a Press Democrat editorial, "It's likely that the HPR bankruptcy will cause doctors and hospitals months -- or years -- of doubt," adding, "The community, too, is losing a company that has affected the lives of many people -- and it is with regret that we say goodbye to HPR" (Santa Rosa Press Democrat, 8/2).
- "Seniors Face Expensive Options": The article reports on options for seniors enrolled in HPR's Medicare+Choice plan -- seniors may shift to traditional fee-for-service Medicare or purchase supplemental Medicare insurance (Moore, Santa Rosa Press Democrat, 8/3).
- "HPR Creditors Seek Quick Resolution of Case": The article reports that although HPR officials have said that they may take two months to draft a liquidation plan, attorneys for the health plan's creditors plan to "pressure" HPR to move "as soon as possible" (Allday, Santa Rosa Press Democrat, 8/3).
- "Subscribers Lose, Doctors Gain From HPR's Demise": The article reports that area providers may benefit from the shut down of HPR, as health plans will expand their physician network to account for increased demand, and physicians will likely receive increased reimbursements from other health plans, although HPR members will likely pay more for health care (Allday, Santa Rosa Press Democrat, 8/4).
- "Ultimately, HPR Was Too Good a Deal ": The article reports that HPR offered a "very good health insurance product that was underpriced," and employers and employees "perhaps got too good a deal" (Bollinger, Santa Rosa Press Democrat, 8/4).